Preamble

The House met at half-past Two o'clock

European Community (Agriculture Ministers' Meeting)

The Minister of State, Ministry of Agriculture, Fisheries and Food: With permission, Mr. Speaker, I wish to make a statement about the Council of Agriculture Ministers' meeting in Luxembourg on 19 October, which met under the chairmanship of my right hon. Friend the Minister of Agriculture, Fisheries and Food. I represented the United Kingdom.
The Council had a general debate on the Commission's guidelines for future decisions on the common agricultural policy contained in its report under the Council of Foreign Ministers' mandate of 30 May 1980. There was a constructive discussion, out of which widely differing views emerged. These issues will now be considered by the Foreign Affairs Council in preparation for next month's meeting of the European Council.
I emphasised the very real need both to contain the cost of the CAP and to deal with the problems of surpluses. We supported the Commission's recommendation for a strict policy on prices, particularly for products in surplus, and the need to relate these more closely to world prices. Regarding measures to discourage unwanted production, I opposed those levies on production which discriminate between producers.
I strongly supported the Commission's view that there must be much stricter controls on national aids.
One country, France, advocated restrictions on the import of certain feeding stuffs from third countries. I opposed this because of its adverse effect on food and feed costs.
The changes recommended by the Commission should continue to slow the growth in agriculture spending. I stressed that in our view the rate of growth in agriculture expenditure should be markedly below the growth in the Community's own resources.
The Commission reported on its further discussions in the Netherlands to eliminate rapidly the preferential gas tariff available to Dutch growers. The Commission had sought to remove this distortion from the start of the 1982 heating season. Supported by the great majority of member States, I emphasised again the serious difficulties faced by United Kingdom growers, and the urgency of a solution for the 1981 heating season about to start. Mr. Dalsager, the Commissioner, said that he would be presenting his proposals to the Commission this week, and that they would be for the current season.
The Council also discussed the recent Commission proposals on battery cages for hens. I said that after a reasonable transitional period the cage area for each bird should be increased to 600 square centimetres. I also made clear that there must be on-the-spot inspection to ensure fairness Community-wide. A number of differing views were expressed, but some countries supported the United Kingdom in the improvement of standards. We shall press for progress on this at the next Council.
The French requested adjustments in MCAs to help their pig industry. The Commission refused this.

Mr. Roy Mason: I am obliged to the Minister of State for his report. I am sure that he is aware of the extreme anger that is felt in the British glasshouse industry, and in the House of Commons, registered by

more than 250 Members who signed a motion dealing with the plight of the glasshouse industry. Is he aware that the industry has suffered considerably in recent times due to subsidised gas being provided to Dutch glasshouses, thereby creating unfair competition and cheap imports? Meantime, the Commission has not taken any action against the Dutch, leaving the problem to national Governments to solve as best they can. As a result of, I think, the Minister's pressure within the Council, the Commissioner is now looking at a formula which may equalise fuel costs in the glasshouse industries within the whole European Economic Community. Is that so? When is it likely to be agreed by Ministers? Who will pay?
On the question of battery hen cages, the animal welfare lobby will have to be recognised. There are growing pressures on the subject throughout the Community. I hope that the Minister will bring constant pressure to bear on the other Agriculture Ministers in the Council to achieve harmonisation on larger cage sizes. I believe that we have the best record in the EEC.
Reform of the common agricultural policy is still as urgent as ever. We must vigorously demand action to stop surplus food production, with its subsidised exports and high costs of storage. The latest example is sugar. The African, Caribbean and Pacific countries, already disturbed at the raw deal that they got in the price review, now witness millions of tons of surplus sugar being produced by beet growers in the EEC. They fear that this may be dumped on world markets at subsidised prices, thereby ruining their market.
Although that sugar is at present being stored, the threat will persist. Even now, the stocking of millions of tons of sugar is a further financial burden on the CAP and the Community budget. I therefore ask the right hon. Gentleman and his right hon. Friend, who is Chairman of the Agriculture Council, what they will do to get the guilty members of the EEC—not the United Kingdom, because we have cut back our beet quotas—to stop this absurd and costly process.
Finally, in view of the difficulties that the Minister experienced yesterday, does he visualise any progress being made on the mandate dealing with the reform of the CAP, either at the Foreign Ministers' meeting or even at the summit meeting in November?

Mr. Buchanan-Smith: As the right hon. Member and the whole House know, we are seriously concerned about the position of the glasshouse industry and the unfair competition with which it has to contend. We were not alone in the Council in this regard. We were strongly supported by almost every other country, and we shall continue to press very hard.
We do not yet know the proposals that the Commissioner intends to put forward. I repeat that the Commissioner intends to put forward the proposals this week and they would relate to the current season, not to the 1982 season, to which the Commission proposals related previously. That is a considerable improvement.
As I am sure the right hon. Gentleman knows, we have not stood aside from the problems of our glasshouse growers. In the interim period, until the matter is settled satisfactorily—and it can be settled satisfactorily only on a European basis—we have given £5.5 million towards the fuel costs of our glasshouse industry.
I am grateful for the support that the right hon. Gentleman gave to the line that I took in the Council on


battery hen cages. Again, we are not alone. Germany and Denmark, in particular, joined us in pressing for higher and improved standards. We shall continue to work for them.
On the matter of reform of the CAP, I was interested in what the right hon. Gentleman said about sugar. However, I remind him that last year, because of the effect of the common agricultural policy, we protected British consumers from prices in world markets that were higher than in the Community. The CAP acted directly in the interests of British consumers.
As regards negotiations with the ACP countries, I beg the right hon. Gentleman to look at the effect on British refiners. What we agreed in April was a package which raised the prices for ACP producers and which also increased the margin for refiners in this country. I know that the right hon. Gentleman shares my concern for the protection of jobs in the sugar refining industry. Therefore, I hope that he will support the line that we have taken.
As to the mandate discussions going to the Foreign Ministers Council and the European Council, a great divergence of view was expressed yesterday, yet I believe that we had a constructive discussion in which a number of very useful points were put. This matter must now go to the Foreign Ministers and then to the European Council. I believe that we made a very good start on this yesterday.

Sir Derek Walker-Smith: Is not the subsidisation by the Dutch of energy for their horticulture proving to be a very protracted and slow-moving saga? Is it not time that concern was reflected in action, and, in particular, what are the Commission's intentions for bringing the appropriate proceedings in the European Court of Justice to quash the infringement of distortion of competition, the prevention of which is specified as one of the cardinal principles of the EEC Treaty?

Mr. Buchanan-Smith: As my right hon. and learned Friend knows, the Commission did not propose to bring forward harmonisation until the autumn of 1982. I and other Ministers there regarded this, as my right hon. and learned Friend does, as totally unsatisfactory. That is why we pressed the Commissioner for earlier action. He has been in discussion with the Netherlands Government, and, given the fact that he will be bringing forward proposals this week in relation to the current heating season, I think that we should wait to see what those proposals are. If we find that those proposals are not satisfactory, we shall certainly press the Commissioner regarding action in the European Court.

Mr. Robert Maclennan: I understand the Minister's arguments against the extension of State aids and the continuing pressure downwards on prices as the Government's general approach to the reform of the CAP, but is he quite confident that in taking the line that he has he will not be putting at risk some British marginal farmers who may be dependent upon State aids in the future?

Mr. Buchanan-Smith: I ask the hon. Gentleman to make a distinction between those aids which originate within the actual State and those which undoubtedly distort competition between different countries and create gross unfairness, particularly for many United Kingdom producers. 

I accept the hon. Gentleman's point regarding the effects of restriction on prices. What we discussed yesterday was that, in relation to those areas that had difficulties as a result of price policies, one had to look at income aids in particular sections of agriculture in difficulty. That is part of the mandate discussion, but we believe that that must be dealt with on a Community basis and not through national aids.

Mr. John Wells: Will my right hon. Friend give an assurance that if the proposals that are to be laid this week, to which he has referred two or three times, do not produce any goodies for some considerable time, our Government will take unilateral action on the glasshouse question? We are all grateful for the £5½million, or slightly more, that has been found, but that money has now gone. My right hon. Friend has referred to the current season starting now. The British grower is in great difficulty, and we must have swift action.
Is my right hon. Friend aware that British confectionery manufacturers are having to pay considerably more for their sugar than is paid by their competitors in Europe, which is therefore having a very adverse effect on British confectionery manufacturers?

Mr. Buchanan-Smith: I shall look into the second point. If my hon. Friend has more details, I should be grateful if he would give them to me.
As regards the major point about glasshouse growers, I hope that there will not be need for unilateral action, because on this issue the United Kingdom is by no means alone. Every other country in Northern Europe feels just as strongly as we do. I am sure that if the Commission comes forward with unsatisfactory proposals we shall not be alone in trying to seek a quicker and swift solution. We shall be in the van of that.

Mr. Colin Shepherd: In my right hon. Friend's quest to deal with the matter of surpluses in the forthcoming proposals, and his expressed anxiety in that respect, will he remember that surplus is beaten only by shortage, and that good housekeeping calls for the provision of a modest excess of production over requirements if there are not to be shortages which will cause stress?

Mr. Buchanan-Smith: I certainly agree with my hon. Friend about that. One of the responsibilities that I stressed in the Council yesterday is to maintain the security and stability of supplies to the housewife. Indeed, I say to those who criticise the CAP that this has been one of its achievements. We must not be misled—I am afraid that some people are misled—into believing that small quantities of food available in the world at cheap prices are the right way to found an agricultural policy or food policy for the producer or the housewife.

Several Hon. Members: rose—

Mr. Speaker: Order. If hon. Members are good enough to co-operate with me by asking brief questions, and if the answers are brief, I hope to be able to call all those who have been rising.

Mr. Geraint Howells: Which products that we produce in this country are in surplus now? How much does it cost to keep them in the intervention system? Will the Minister comment on the marginal land survey and the



Government's proposals to help in relation to hill and marginal land? Will those proposals be made known this year?

Mr. Buchanan-Smith: If the hon. Gentleman wants precise figures on the costs of storing what surpluses there are, I shall be happy to provide them. As he knows, for the Community as a whole, the two major products are milk and sugar. I very much commend the good efforts of the milk marketing boards and dairy companies in extending the markets for United Kingdom produce abroad, and in substituting United Kingdom produce for imported produce in this market. That is an area in which we need a considerably greater effort.
The question of marginal land production was not covered at yesterday's Council.

Mr. Albert McQuarrie: Was the question of the regulations introduced by the Minister of Agriculture on the question of the turkey and poultry industries and the banning of imports from France on the grounds of environmental health and Newcastle disease raised at the meeting? If it was, will my right hon. Friend give an assurance that in no circumstances will those regulations be eased so long as diseases are liable to occur, especially when our turkey and poultry industries are so desperately in need of assistance and we are coming to the time when their trade will be beneficial to the nation?

Mr. Buchanan-Smith: Yes, the question was raised. There was no substantial discussion on it because the Commission has asked the United Kingdom to comment on what it is doing. We shall be presenting our comments on this matter before the end of this month.
We would not have introduced this measure if we did not believe that it was necessary for the protection of the health of British poultry stocks. Having introduced that policy, we shall continue to defend it vigorously.

Mr. Stanley Newens: Does the Minister recognise that the longer that effective action to rectify the position of British glasshouse growers is delayed, the greater the damage that will be done to them, because at present they are having to make decisions about next year? Therefore, will the Minister make it clear that the Government will in no circumstances be prepared to stand by and allow the British glasshouse industry to collapse, and, if necessary, that they will take unilateral action to see that it does not collapse?

Mr. Buchanan-Smith: On the first part of the hon. Gentleman's question, he could not have put the point better than I did at yesterday's meeting of the Council of Ministers. I hope that he will at least acknowledge the improvement that we have so far achieved. The Commission is bringing forward proposals not for the 1982 season but for the current season. I accept that growers are now planning their crops for this season. In reply to earlier supplementary questions, I said that if the Commission did not come up with satisfactory proposals we should strongly press for whatever action might be needed.

Mr. Robin Maxwell-Hyslop: Will my right hon. and hon. Friends get together with their counterparts in Germany, Belgium and France so that all of them put on countervailing duties, as they are entitled to do under the Treaty of Rome? Would not that consolidate and

concentrate the mind of the Agriculture Commissioner quite remarkably and enable him to produce an alternative way of dealing with the problem?

Mr. Buchanan-Smith: We are already working in close touch with our colleagues in those countries. If we receive unsatisfactory proposals from the Commissioner, we shall get in touch with them to see what further action may be needed and we shall co-operate with them.

Mr. Thomas Torney: Does the Minister agree that since its inception the common agricultural policy has been prejudiced against the United Kingdom farmer, food producer and consumer? Would it not be better if the hundreds of millions of pounds that Britain pours into the CAP were used in direct aids to farmers, food producers and consumers?

Mr. Buchanan-Smith: I do not agree with the hon. Gentleman. As I hope he will acknowledge, the CAP has brought considerable benefits in terms of security of food supply. I hope that he will recognise that over the years of the CAP we have seen a considerable improvement in Britain's self-sufficiency as regards the foodstuffs that we grow. I hope that the hon. Gentleman will stop such sniping at the CAP and that he will acknowledge some of the benefits to both producer and consumer alike.

Sir Walter Clegg: Is my right hon. Friend aware that he will gain immense support from both sides of the House and from the country for the tough line that he is taking on the growers' problem? Will he tell the public—through the medium of this House—that English tomatoes, especially Fylde tomatoes, are much tastier than Dutch tomatoes?

Mr. Buchanan-Smith: I should like to add that Scottish tomatoes are extremely tasty as well.

Several Hon. Members: rose—

Mr. Speaker: Order. If I were not completely impartial, I would mention another tomato.

Mr. Nigel Spearing: Did the Council of Ministers discuss the degree to which the common agricultural budget is going under or over target? Does not the right hon. Gentleman agree that, whichever way the budget is going, it is impossible to budget for this matter and that if it is under budget it could be over budget next year?

Mr. Buchanan-Smith: I am sure that the hon. Gentleman will be disappointed to know that the CAP is under budget. We are currently running at about 0.87 of the 1 per cent. of the VAT ceiling. Therefore, the CAP is well within the budget. The hon. Gentleman will also be disappointed to be reminded that during the last three years of the Labour Government, from 1976 to 1979, expenditure grew by 87 per cent., whereas in the three years from 1979 to 1982 it rose by only 33 per cent. I assure the hon. Gentleman that we shall continue with our policy to contain that expenditure, because we have proved that it can be done.

Miss Janet Fookes: May I remind my right hon. Friend that the animal welfare lobby, both in this country and in other European countries, will be satisfied with nothing less than the orderly phasing out of the battery system, as advocated by our Select Committee on Agriculture?

Mr. Buchanan-Smith: I am aware of the views held on this subject. I am sure that my hon. Friend would acknowledge that the effect of completely going out of battery production would be to have a dramatic impact on the price of eggs. First, we must try to ensure that we have better-sized cages for battery hens and we must follow the recommendations of some of the bodies that have investigated the matter. Secondly, we should continue to pursue the study of alternative means of production to that of the battery cage. I made that point yesterday in the Council of Ministers.

Mr. Norman Atkinson: The point that the Minister has made about battery hen cages goes in the right direction, but does he not realise that 600 square centimetres is little bigger than the size of the Order Paper? In any language, to imprison a bird within such a small floor space must constitute absolute cruelty. If the Minister is not prepared to pay the price for the abolition of cruelty to birds, he should be firm in demanding that the floor space in battery cages should be four, five or even six times the size of the bloody Order Paper.

Mr. Buchanan-Smith: rose—

Mr. Speaker: Order. I am not quite sure whether I heard the hon. Gentleman, but if he said what I rather fancy he did say I should tell him that that is not parliamentary language and is not the language used in this House.

Mr. Atkinson: You are right, Mr. Speaker. I withdraw the adjective that I used, and I accept that it was not parliamentary language. At least it makes the point.

Mr. Speaker: I am much obliged to the hon. Gentleman.

Mr. Buchanan-Smith: As the hon. Gentleman will have realised from my statement, we are pressing strongly for improvements in standards and we shall continue to do so. I am glad to say that we have support from other countries. Although we want to improve the standards in relation to battery hens, we must be aware of the likely effects, particularly on the price of eggs. If we abolished the battery cage system and moved to a system of free-range hens, there might be an 80 per cent. increase in the price of eggs. The Government are also responsible for looking after the needs of consumers.

Mr. David Myles: Given that the increase in production of milk and milk products has decreased to a trickle, and given that export restitution on milk products costs much less, will my right hon. Friend consider abandoning the collection of the milk co-responsibility levy, which is an increased burden on producers and which could cause the price of milk to consumers to increase?

Mr. Buchanan-Smith: The level of the co-responsibility levy is decided at the annual price review. At the next price review I shall bear in mind my hon. Friend's point. Yesterday, at the Council of Ministers, we made it clear—my hon. Friend was right to point this out—that it makes no sense to have a flat rate levy that the producer has to pay and which in turn raises the price to the consumer. It would be far better to hold down the price of the commodity instead of having the flat rate levy.

Sir Frederick Burden: Although I accept the problems associated with abolishing battery cages at present, may I ask my right hon. Friend to give

an assurance that every other method of egg production will be considered? Today my right hon. Friend has shown that the Government are concerned about the size of battery cages. Will he therefore introduce regulations to ensure that we at least expand the size of battery cages so that the worst cruelty that is now accepted is abolished first in this country?

Mr. Buchanan-Smith: I accept my hon. Friend's point about alternative forms of production. As he knows, this subject is being pursued by the Agriculture Departments in the United Kingdom. Consideration is also being given on a European scale. Yesterday I particularly asked the Commission to co-ordinate the efforts made in the different countries so that the results of research carried out in the different areas could be properly co-ordinated.

Mr. Geoffrey Johnson Smith: My right hon. Friend has told the House about the pressure being brought on the Government to drop the ban on the imports of French poultry. Is any pressure being put on the French Government to stop their unscrupulous subsidising of the French poultry industry?

Mr. Buchanan-Smith: I raised that point yesterday in relation to the different national aids that countries give. As my hon. Friend knows, the Commission has declared that some of the French national aids are illegal and others are still under investigation. I assure my hon. Friend that we shall continue to press that point.

Mr. John Townend: Is my right hon. Friend aware that his statement will be welcomed by the glasshouse industry, particularly as he said that the Commission's proposals are imminent and will apply to the current season? However, is he aware that unless action is taken quickly much of the industry will be unable to survive another 12 months like the last 12 months?

Mr. Buchanan-Smith: Yes. Precisely because of the urgent state of the industry, my right hon. Friend introduced an aid scheme involving over £5½ million. I believe that money speaks better than words, and we have done it.

Mr. Barry Henderson: After my right hon. Friend's contacts with Ministers and Commissioners in and out of the Council chamber, did he come away from Brussels more or less optimistic of being able to deliver before Christmas a package marked "Common Fisheries Policy"?

Mr. Buchanan-Smith: There was no discussion about the common fisheries policy at the meeting of Agriculture Ministers. There is to be a meeting of Fishery Ministers next week. I might be in a better position to answer that question then.

Mr. Tony Marlow: I am delighted that my right hon. Friend is fighting so vigorously for reform of the common agricultural policy. I anticipate that he is not over-optimistic that he will be successful. It will take a long time, but in the meantime will he consider asking the Community for compensation for that part of our food which we buy from the Continent at common agricultural policy prices and above world market prices, which my right hon. Friend himself said yesterday will involve a bigger gap in the future than it has in the past and is a burden additional to that of the budget and support for our own agriculture?

Mr. Buchanan-Smith: I should be interested if, in return, my hon. Friend would suggest giving back to the Community money that Britain gained in instances when prices in Britain were lower than in the world market.

Mr. Gavin Strang: I should like to comment on the Minister's reply to my hon. Friend the Member for Harlow (Mr. Newens). Is the right hon. Gentleman aware that we accept that he is concerned about the position of the glasshouse industry and hope that EEC action will end the unfair competition from the Netherlands? If that does not succeed, does the Minister accept that there is no alternative to national action, either by a comprehensive national energy policy or national protective measures? Will he give an assurance that the Government will address themselves to these matters quickly if necessary?

Mr. Buchanan-Smith: In relation to national action, money speaks better than words. The Government have already proved that they will not stand aside. The hon. Member for Edinburgh, East (Mr. Strang) has experience in these matters. He will know that it is foolish to anticipate publicly at this stage what we might do when, in the course of this week, the Commission is making proposals to meet our objections.

Companies (Transfers to Channel Islands and Isle of Man)

Mr. George Foulkes: I beg to move, 
That leave be given to bring in a Bill to prohibit the transfer of funds from companies registered in the United Kindgom to subsidiaries of those companies or to companies of which they are subsidiaries registered in the Channel Islands or the Isle of Man otherwise than in settlement of bargains at arm's length.
You and I, Mr. Speaker, are paying more tax than might otherwise be necessary because of tax dodgers. Even more important, my constituents are paying more tax. Even worse, they are suffering public services of a much poorer standard because of tax dodgers. The Cabinet might have been saved this morning's discussion if, instead of examining the further cuts, it pursued the tax dodgers.
The hon. Member for Aberdeen, South (Mr. Sproat) has often made it his business to highlight the so-called social security scroungers. I make it clear that we do not condone illegality in claiming social security or other benefits, but public attention and Government resources concentrated on that abuse far outweigh its size and importance compared with the scandal of tax evasion and tax avoidance.
Illegal tax evasion needs to be tackled more vigorously by the Government, but there is also a need for much greater effort to tighten up on currently legal tax avoidance. This Bill is intended to deal with one small aspect of that. The Bill deals with tax avoidance through the Channel Islands and the Isle of Man. That does not mean that I am not equally concerned with money lost to the United Kingdom Revenue through other tax havens such as the Cayman Islands. There is an equal need for urgent action on all tax avoidance.
Indeed, taking up the challenge of the island Governments earlier this month, I visited Jersey and Guernsey to see the position for myself. Nothing that I saw convinced me that I was wrong about my intentions. Indeed, the reverse was true. I was preceded on my visit by two Tory Members who attacked me for introducing my Bill. The hon. Member for Thanet, East (Mr. Aitken), however, cannot be said to be a disinterested observer, since he has just bought a Guernsey bank. The hon. Member for Aberdeenshire, East (Mr. McQuarrie) seemed to think that it was all right for Tory Members to pursue private interests in Gibraltar but not for Labour Members to pursue the public interest in the Channel Islands.
I remain convinced that the use of the Channel Islands and the Isle of Man as tax havens is doubly disturbing because they depend so much on the United Kingdom and its services, yet they provide an easily accessible, English-speaking, comfortable bolthole for every type of avoidance of United Kingdom tax which could and should help to pay for those services. The islands rely upon the United Kingdom for defence. Islanders travel abroad on British passports, yet only the Isle of Man pays a token contribution towards the services. For any education, health, prison and other services beyond the basics, residents of the islands have to come to the United Kingdom.
A visitor to the islands can see that almost every aspect of life relies on the relationship with the mainland. However, the Governments on the islands actively


encourage their use for tax avoidance. The level of tax is kept down to 20 per cent. to attract evaders, despite deteriorating public services on the islands which are already causing disquiet among native islanders, as I discovered when I visited them. The profits on which tax is levied are negotiable with the island authorities.
So-called stability is provided on the islands by feudal electoral systems that stifle potential opposition. Many of the islands' Government members are made directors of the banks and companies that are increasingly flocking to the islands.
For some time now, the islands have been tax havens for individuals—some of the less respectable novelists, sportsmen and entertainers who built their fortunes through the British public but who do not want to contribute towards our services.
Increasingly, the setting up of trusts to avoid United Kingdom tax has been developed. Sir Charles Clore's attempt to avoid capital transfer tax on the sale of his Hertfordshire estate is the subject of detailed legal action.
However, my principal concern today is the way in which companies are being set up to avoid United Kingdom tax by various means. If I describe the methods adopted, hon. Members might be made aware of the need for urgent action.
New companies are being set up on Jersey at the rate of about 50 a week. That is not bad for an island of about 70,000 people. However, the islands do not allow individuals to become resident to conduct business on the islands, so nominees from among the island lawyers and bankers are appointed to run the companies. It is inconceivable that United Kingdom or multinational companies would allow major decisions to be taken by the nominees. The sham company, therefore, receives so-called recommendations from the real owners, which of course, "acting on their own discretion", they nearly always approve.
Such island lawyers can receive as much as £500 or £1,000 for each company for which they become nominees. Some firms can take on hundreds and sometimes thousands of companies, thus earning hundreds of thousands of pounds each year for acting as fronts for tax avoidance.
The situation is farcical in the case of Sark, which has a population of only 600. Many companies register there. Boatloads of directors arrive for meetings to satisfy the requirement that a company is deemed to be managed and controlled where the directors meet.
There are many other examples that are too numerous to mention. They are besmirching the name of the offshore British Islands. One wonders why nothing has been done about it by successive British Governments, including Labour Governments. It has been argued that the tax havens benefit the United Kingdom by attracting foreign funds. However, of about £2,000 million held on deposit in Jersey banks, less than 10 per cent. is derived from outwith the United Kingdom or Channel Islands. Indeed, there is little advantage anyway for many foreign investors using the islands rather than the United Kingdom, and the only foreign funds likely to be attracted are of doubtful origin, such as the proceeds of crime, or of investors who wish to evade tax in their own country. As rumoured recently, the islands are used as a conduit for funds from South Africa.
I concede that the Revenue has partly recognised the problem. It has highlighted it in two consultative papers

produced in January. However, we need action now. We need action to change the definition of "residence" or "domicile" of a company to stop the operation of sham companies. We need action to give power to the British Government to obtain information about companies registered on one of the islands with United Kingdom interests.
It is indicative of the island Governments' attitude that companies are not required to make annual accounts public, as they are in the United Kingdom. The required secrecy for tax dodgers is thereby guaranteed.
We need action to give the Inland Revenue powers to obtain information from the Channel Islands and the Isle of Man for United Kingdom tax collection purposes. Above all, we need action to limit the transfer of funds between United Kingdom companies and linked companies on the islands to prevent the avoidance of United Kingdom tax in preference to the favourable tax rates on the islands.
The proposed Bill is intended as a small contribution towards that. The real action must come from the Government. The Kilbrandon Commission recognised the abuses in 1973 and Lord Crowther-Hunt and Professor Peacock expressed concern that it did not look in detail at that matter. Since then, the growth of the islands as tax havens has mushroomed, with the Isle of Man now in open competition with the Channel Islands to attract tax dodgers that bleed off vital revenue from the United Kingdom.
All hon. Members should support the Bill. My colleagues on the Labour Benches will do so on grounds of equity and social justice. Equally, Conservative Members should bear in mind the now immortal words of the former Minister of State, Treasury, the hon. and learned Member for Dover and Deal (Mr. Rees), who is with us today. He said "We need the money." It is much better to get the money that his Government need from the tax-dodging millionaires than from the increase in taxes that the hon. Member for Aberdeenshire, East says he will revolt against, or from the forecast further attack on the standard of living of our pensioners.

Mr. Albert McQuarrie: I declare that I have no financial or other interest in companies that are registered in the Channel Islands, the Isle of Man or Gibraltar. The hon. Member for South Ayrshire (Mr. Foulkes) took the liberty of mentioning Gibraltar and said that private interests could have companies there. It is obvious that he has not done his homework. He should know that Gibraltar has never been classified as a tax haven. It pays as much tax as the United Kingdom. [HON. MEMBERS: "He did not say that"].
I oppose the motion because it is an intrusion into the rights that have been vested in the Parliaments of the Channel Islands. The hon. Gentleman is well aware that it is within the power of those States to decide which ordinances should be legislated for, the registration of companies within their territories and the nature of tax collection.
The hon. Gentleman made great play of the fact that there was insufficient legislation in the United Kingdom. Section 482 of the Income and Corporation Taxes Act 1970 has been the main provision for counteracting international tax evasion in the corporate sector for many years. That section makes unlawful company registrations, transfers of trade abroad and certain transactions


relating to overseas companies in a United Kingdom group without Treasury consent. The penalties for infringement include imprisonment and fines. In addition, the Board of Inland Revenue has powers under section 17 of the Finance Act 1975 to obtain information about overseas companies, including shareholdings, accounts and details of their underlying transactions. There appears to be adequate legislation in Britain to cater for any attempt made to transfer companies to those alleged tax havens.

Mr. Dennis Canavan: Who wrote the hon. Gentleman's speech?

Mr. McQuarrie: I wrote my speech. If the hon. Gentleman needs any help with speech writing at any time, I shall be glad to help him.
The hon. Member for South Ayrshire is ever ready to pounce on any issue at home or abroad that is abhorrent to his Socialist doctrines. He should adopt the measures that he recommended to hon. Members when he was quoted in the Jersey Evening Post on 23 September 1981.
He said: 
Those MPs who seem to spend more time on their own financial interests than the interests of the constituents they were elected to represent do a great disservice to our democratic system".
That newspaper also quoted the hon. Gentleman as saying that the last Bill that he attempted to introduce to the House on the subject of space invaders
was voted down by the Tory majority currently in the House of Commons because of their vested interest in supporting the "quick-buck' merchants at any price.
He did not have the common decency to say that many Conservative Members supported his Bill that would have taxed space invader and other machines. If he is good enough to criticise, he should equally be good enough to compliment. Unfortunately, he does not do so. The hon. Gentleman would be well advised to take that advice, rather than endeavouring to interfere in the affairs of a friendly State that is perfectly capable of passing its own legislation without his intervention.
I oppose the motion and hope that the House will see it as a mere publicity stunt that has no substance or merit. I hope that the House will reject it and leave the Channel Islands and the Isle of Man to conduct their own affairs.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—

The House divided: Ayes 134, Noes 151.

Division No. 304]
[4.16 pm


AYES


Allaun, Frank
Coleman, Donald


Anderson, Donald
Conlan, Bernard


Ashley, Rt Hon Jack
Cook, Robin F.


Ashton, Joe
Cowans, Harry


Atkinson, N.(H'gey,)
Craigen, J. M. (G'gow, M'hill)


Bennett, Andrew(St'kp't N)
Crowther, Stan


Booth, Rt Hon Albert
Cryer, Bob


Bottomley, Rt Hon A.(M'b'ro)
Cunliffe, Lawrence


Bray, Dr Jeremy
Cunningham, Dr J. (W'h'n)


Brown, Hugh D. (Provan)
Dalyell, Tam


Buchan, Norman
Davis, Clinton (Hackney C)


Callaghan, Jim (Midd't'n &amp; P)
Davis, T. (B'ham, Stechf'd)



Campbell-Savours, Dale
Dean, Joseph (Leeds West)


Canavan, Dennis
Dewar, Donald


Carmichael, Neil
Dixon, Donald


Clark, Dr David (S Shields)
Dobson, Frank


Cocks, Rt Hon M. (B'stol S)
Dormand, Jack



Douglas, Dick
Mitchell, Austin (Grimsby)


Douglas-Mann, Bruce
Mitchell, R. C. (Soton Itchen)


Dubs, Alfred
Morris, Rt Hon A. (W'shawe)


Eadie, Alex
Morris, Rt Hon C. (O'shaw)


Eastham, Ken
Morton, George


English, Michael
Mulley, Rt Hon Frederick


Evans, loan (Aberdare)

O'Neill, Martin


Ewing, Harry
Orme, Rt Hon Stanley


Fletcher, Ted (Darlington)
Palmer, Arthur


Foster, Derek
Parry, Robert


Foulkes, George
Pavitt, Laurie


Garrett, John (Norwich S)
Powell, Raymond (Ogmore)


Garrett, W. E. (Wallsend)
Prescott, John


Graham, Ted
Race, Reg


Grant, George (Morpeth)
Radice, Giles


Hamilton, James (Bothwell)
Richardson, Jo


Hamilton, W. W. (C'tral Fife)
Roberts, Albert (Normanton)


Hardy, Peter
Robinson, G. (Coventry NW)


Harrison, Rt Hon Walter
Rooker, J. W.


Hattersley, Rt Hon Roy
Ross, Ernest (Dundee West)


Haynes, Frank
Sandelson, Neville


Healey, Rt Hon Denis
Sever, John


Homewood, William
Sheldon, Rt Hon R.


Howell, Rt Hon D.
Silkin, Rt Hon J. (Deptford)


Hoyle, Douglas
Silverman, Julius


Huckfield, Les
Skinner, Dennis


Hughes, Robert (Aberdeen N)
Smith, Rt Hon J. (N Lanark)


Hughes, Roy (Newport)
Snape, Peter


Jay, Rt Hon Douglas
Soley, Clive


John, Brynmor
Spearing, Nigel


Johnson, Walter (Derby S)
Spriggs, Leslie


Kaufman, Rt Hon Gerald
Stewart, Rt Hon D. (W Isles)


Kinnock, Neil
Stoddart, David


Lamond, James
Strang, Gavin


Leighton, Ronald
Straw, Jack


Lewis, Arthur (N'ham NW)
Taylor, Mrs Ann (Bolton W)


Lewis, Ron (Carlisle)
Thorne, Stan (Preston South)


Lyon, Alexander (York)
Tilley, John


McCartney, Hugh
Torney, Tom


McDonald, Dr Oonagh
Urwin, Rt Hon Tom


McElhone, Frank
Watkins, David


McGuire, Michael (Ince)
Whitehead, Phillip


McKay, Allen (Penistone)
Willey, Rt Hon Frederick


McMahon, Andrew
Wilson, Gordon (Dundee E)


McNally, Thomas
Winnick, David


McNamara, Kevin
Woodall, Alec


McTaggart, Robert
Woolmer, Kenneth


McWilliam, John
Young, David (Bolton E)


Marshall, Jim (Leicester S)



Mason, Rt Hon Roy
Tellers for the Ayes:


Maynard, Miss Joan
Mr. John Maxton and


Millan, Rt Hon Bruce
Mr. John Home Robertson.




NOES


Adley, Robert
Chapman, Sydney


Alexander, Richard
Clark, Sir W. (Croydon S)


Ancram, Michael
Clegg, Sir Walter


Aspinwall, Jack
Cockeram, Eric


Atkins, Robert(Preston N)
Colvin, Michael


Baker, Nicholas (N Dorset)
Cope, John


Beaumont-Dark, Anthony
Corrie, John


Beith, A. J.
Costain, Sir Albert


Bennett, Sir Frederic (T'bay)
Cranborne, Viscount


Berry, Hon Anthony
Dorrell, Stephen


Biggs-Davison, Sir John
Dover, Denshore


Blackburn, John
Dunn, Robert (Dartford)


Boscawen, Hon Robert
Durant, Tony


Bottomley, Peter (W'wich W)
Edwards, Rt Hon N. (P'broke)


Braine, Sir Bernard
Eggar, Tim


Brinton, Tim
Eyre, Reginald


Brooke, Hon Peter
Fairgrieve, Sir Russell


Brotherton, Michael
Fell, Anthony


Brown, Michael(Brigg &amp; Sc'n)

Finsberg, Geoffrey


Browne, John (Winchester)
Fisher, Sir Nigel


Bruce-Gardyne, John
Fletcher, A. (Ed'nb'gh N)


Bryan, Sir Paul
Fletcher-Cooke, Sir Charles


Budgen, Nick
Fookes, Miss Janet


Burden, Sir Frederick
Fox, Marcus


Butcher, John
Freud, Clement


Cadbury, Jocelyn
Fry, Peter






Garel-Jones, Tristan
Rees, Peter (Dover and Deal)


Goodlad, Alastair
Rhodes James, Robert


Gorst, John
Rhys Williams, Sir Brandon


Gower, Sir Raymond
Roberts, M. (Cardiff NW)


Grieve, Percy
Roberts, Wyn (Conway)


Grimond, Rt Hon J.
Ross, Stephen (Isle of Wight)


Gummer, John Selwyn
Rossi, Hugh


Hamilton, Michael (Salisbury)
Rost, Peter


Hawkins, Paul
Scott, Nicholas


Henderson, Barry
Shaw, Giles (Pudsey)


Higgins, Rt Hon Terence L.
Shaw, Michael (Scarborough)


Hill, James
Shepherd, Richard


Holland, Philip (Carlton)
Sims, Roger


Hordern, Peter
Smith, Dudley


Howe, Rt Hon Sir Geoffrey
Speller, Tony


Hunt, David (Wirral)
Spence, John


Jessel, Toby
Spicer, Jim (West Dorset)


Johnson Smith, Geoffrey
Stainton, Keith


Jopling, Rt Hon Michael
Stanbrook, Ivor


Kershaw, Sir Anthony
Stanley, John


Kitson, Sir Timothy
Steel, Rt Hon David


Knight, Mrs Jill
Stevens, Martin


Knox, David
Stewart, Ian (Hitchin)


Lawrence, Ivan
Tebbit, Rt Hon Norman


Lloyd, Ian (Havant &amp; W'loo)
Temple-Morris, Peter


Lloyd, Peter (Fareham)
Thomas, Rt Hon Peter


McCrindle, Robert
Thompson, Donald


MacGregor, John
Thornton, Malcolm


McQuarrie, Albert
Townend, John (Bridlington)


Mates, Michael
Townsend, Cyril D, (B'heath)


Mather, Carol
Trotter, Neville


Maude, Rt Hon Sir Angus
Vaughan, Dr Gerard


Mellor, David
Viggers, Peter


Miller, Hal (B'grove)
Waddington, David


Mills, lain (Meriden)
Wainwright, R.(Colne V)


Moate, Roger
Walker-Smith, Rt Hon Sir D.


Monro, Sir Hector
Wall, Sir Patrick


Morrison, Hon P. (Chester)
Waller, Gary


Mudd, David
Walters, Dennis


Myles, David
Warren, Kenneth


Neale, Gerrard
Watson, John


Needham, Richard
Whitney, Raymond


Nelson, Anthony
Wickenden, Keith


Neubert, Michael
Wiggin, Jerry


Newton, Tony
Williams, D.(Montgomery)


Onslow, Cranley
Winterton, Nicholas


Osborn, John
Wolfson, Mark


Page, John (Harrow, West)



Prentice, Rt Hon Reg
Tellers for the Noes:


Price, Sir David (Eastleigh)
Mr. Bill Walker and


Proctor, K. Harvey
Mr. Christopher Murphy.


Rathbone, Tim

Question accordingly negatived.

Orders of the Day — Companies (No. 2) Bill [Lords]

As amended (in the Standing Committee), further considered.

Mr. Speaker: Certain minor corrections are necessary to five of the Government amendments. A list of the corrections is available in the Vote Office and the amendments will be moved in their correct form.

Clause 1

GENERAL PROVISIONS WITH RESPECT TO THE FORM AND CONTENT OF ACCOUNTS

Amendment made: No. 1, in page 3, line 20, leave out '(within the meaning of the Companies Act 1980)'.—[Mr. Eyre.]

Clause 3

EXTENSION OF REQUIREMENTS OF SECTION 4 OF THE 1967 ACT

Mr. Clinton Davis: I beg to move amendment No. 167, in page 5, line 13, leave out 'one tenth' and insert 'one twentieth.'

Mr. Speaker: With this it will be convenient to take amendment No 168, in page 6, line 23, leave out 'one-fifth' and insert 'one-tenth'.

Mr. Davis: The Opposition approve of the basic purpose behind the clause, which is designed to secure an extension of the requirements of section 4 of the 1967 Act. We feel that the figure that the Government have included represents too high a threshold. The Government said in Committee that they would consider the figure without any commitment to change it. However, we have had no indication from the Government that they are prepared to reconsider the issue.
The consequence of the Government's insistence on their own figure is that a minority holding of between 5 and 10 per cent. could in itself represent a substantial holding, especially in substantial and large companies. As we have learnt from recent history, that sort of holding can involve a large investment that might be located abroad. We ask the Government to consider that afresh.
We think that the provision of one-fifth in amendment No. 168 is too high. The Government accepted the maximum criteria that were laid down in the directive and there are circumstances, which were vividly illustrated by my hon. Friend the Member for Norwood (Mr. Fraser) in Committee, in which, on paper, a relatively small shareholding of even less than 20 per cent, in one pair of hands could represent a powerful block, capable of wielding vast influence over the appointment of the board, policies and control of the company.
It is influence, not control, that I am talking about in this respect. The Minister will recognise that one does not have to control voting shares to be able to wield influence. If the Minister argues that that relates simply to financial participating interest and not to control, I make the point as emphatically as I can that it is this measure of influence that is equally important.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): I appreciate the way in which the hon. Member for Hackney, Central (Mr. Davis) has moved the amendment.
The principle underlying amendment No. 167 was discussed in Committee when my right hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) explained that the Government had decided to set at 10 per cent. the threshold for disclosure of non-financial information in respect of holdings other than subsidiaries required by article 43.1(2) of the directive in order to bring the threshold into line with the comparable disclosures required already under section 4 of the 1967 Act.
We noted carefully the reasonable remarks of the hon. member for Coventry, North-West (Mr. Robinson) in Committee. I reassure Opposition members that the Government will keep the question of the threshold under review. However, I am sure that hon. Members will appreciate the need to consider carefully any proposals to extend disclosure requirements to ensure that users of accounts are not swamped with large volumes of information of doubtful value and that too heavy a burden is not placed on accounts preparers. The Bill, as required by the fourth directive, adds to that burden. We are strongly of the view that now is not the time to add further straws to the camel's back.
Amendment No. 168 was also considered in Committee. The background to the Government's decision to establish the threshold for disclosure of financial information in respect of holdings at 20 per cent. was explained. Existing legislation requires such financial information only in the limited circumstances set out in paragraph 5A of the present schedule 8 to the Companies Act 1948. The Green Paper proposal that that provision should be repealed was generally welcomed.
The provisions of clause 4 have as their sole objective implementation of article 43.1(2) of the directive because in practice most companies are likely to take advantage of clause 4(5) by including investments in bodies corporate other than subsidiaries by way of the equity method of valuation in their accounts or in a note thereto. This would avoid the necessity of providing financial information holding by holding. In the limited number of cases in which we expect companies to give their financial information, we have considered it unnecessary to extend the requirement beyond the minimum level set in the directive.
Against those considerations, I have considered the remarks made in Committee by the hon. Member for Norwood (Mr. Fraser), referred to again today by the hon. Member for Hackney, Central. Those remarks concerned a holding of less than 20 per cent. of the share capital but which represented a significant proportion of the holding company's assets. At the end the day, this is a matter of judgment. In the Government's view, in such circumstances, it is likely that a company and its auditors would feel obliged to make appropriate disclosure of the circumstances, although we have concluded that it is not necessary to extend the exacting requirements of clause 4 to those fairly exceptional cases. As in relation to the thresholds under clause 3, I assure the hon. Member for Hackney, Central that we will continue to keep this question under review. 

With that assurance, I trust that the hon. Member will feel able to withdraw his amendment.

Mr. Clinton Davis: The Government have said that they will keep a hell of a lot under review. The Minister will have to keep his eyes and ears open over the next six months. However, having regard to what he has said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Clause 8

SMALL AND MEDIUM-SIZED COMPANIES

Mr. Clinton Davis: I beg to move amendment No. 170, in page 14, line 6, leave out '£1,400,000; and insert '£250,000.'

Mr. Deputy Speaker: With this it will be convenient to take the following amendments:
No. 171, in page 14, line 7, leave out '£700,000' and insert '£125,000'.
No. 172, in page 14, line 10, leave out 'fifty' and insert 'ten'.
No. 173, in page 14, line 14, leave out '£2,800,000' and insert '£600,000'.
No. 175, in page 14, line 17, leave out 'two hundred and fifty' and insert 'fifty'.
No. 176, in page 14, leave out lines 23 to 37.

Mr. Davis: These amendments go to the heart of this part of the Bill. We do not oppose the classification of companies with a view to the disclosure requirements which are imposed upon them. We were the authors of that idea in the 1977 Green Paper, although we did not disclose at that stage the definitions and criteria that we wished to use because they were subject to discussion. I argue strenuously on behalf of the Opposition that the definitions which have been used for describing large, medium and small companies are wrong.
The Government say that they are implementing the EEC directive in this regard. They are going to the maximum limits which have been defined by the directive. They are under no obligation to do that. If they accepted our amendments, they would still be complying with the directive. I want to get that counter-argument that might be used by Government supporters out of the way.
The definitions of a small company are contained in clause 8(2). Anyone who is a little sceptical about the Government's definitions will have his anxieties reinforced by the way in which the Government have reacted since the Green Paper consultations. The qualifying conditions for a small company are, first: 
the amount of its turnover must not exceed £1,400,000".
That is hardly a small company if one is dealing with the upper echelons of that figure. The second condition is: 
its balance sheet total must not exceed £700,000".
That is not insubstantial. The third criterion is: 
The average number of persons employed by the company in the financial year in question (determined on a weekly basis) must not exceed fifty.
I do not believe that that is a small company, although small companies are included within that definition. The figures which I have put forward in my series of amendments still include companies which, in previous definitions, would hardly be regarded as small. However, my figures are substantially less than the Government's. I am suggesting that instead of a figure of £1,400,000,


there should be one of £250,000 for the turnover. We are suggesting that instead of the balance sheet total of £700,000 provided for in the Bill, we would insert £125,000. Instead of 50 employees we should have 10 employees. Similar changes are made for the medium-sized companies. That applies to the other three amendments.
In substance, we are saying that the Government have the figures wrong. By no stretch of the imagination could a company which comes within the top levels of the definition of a small company in clause 8 be regarded as small. The Government have extended the criteria which they laid down in their Green Paper in September 1979. At the time, they suggested a turnover figure of £1,300,000 and a balance sheet total of £650,000. They have increased those figures. They say that they have done so because there ought to be a 10 per cent. leeway.
Really small companies—this is the gravamen of our case—should be able to gain some exemption from the full rigours of the company law requirements relating to disclosure. Indeed, we went even further in Committee, because we argued that tiny companies—the small shop carrying on a fish and chip business or confectionery business on the street corner—ought to be able to claim exemption from audit. We are not arguing that today. We were defeated on that proposal. That establishes our bona fides about the matter.
We believe that it is entirely wrong for the same principle to apply to a large number of companies which cannot by any stretch of the imagination be regarded as small, and which will qualify for exemption under these provisions.
About two years ago, the Amalgamated Union of Engineering Workers carried out a survey and found that about 60 per cent. of companies in the engineering industry employed fewer than 50 persons, and that 50 per cent. employed fewer than 25 persons. That indicates the scale of the problem that we shall encounter in this respect.
The accountancy profession itself expressed very serious reservations about these definitions. The Minister has been full of praise for the accountancy profession. Last night he waxed as eloquenty about that profession as he did about the contribution made by the hon. Member for Kensington (Sir B. Rhys Williams) on the question of audit committees. He was over the moon about the profession. But, over the moon though he may have been on that occasion, members of the profession do not like what he is doing. They believe that the criteria for the small company—in the Green Paper it was called a proprietary company, and the title has been changed—are far too high. The criteria have been extended since 1979.
The accountancy profession and the trade unions, which have expressed great reservations about the small and medium-sized companies in this regard, are right to do so. The effect of the Government's proposals is that small companies will no longer be under any requirement to file profit and loss accounts at Companies House for public information. They will be obliged to do no more than file an abridged balance sheet. They will not have to file any information concerning the aggregate remuneration of the directors. They will not have to meet the same rigorous accounting standards as they are required to meet today.
The information that is no longer to be made available to the public is, for the higher echelons of a company within the definition, information that should be readily

available to the public. It is stretching the imagination a little to say that the information can be made available voluntarily by the companies. Blocks will be put in the way. Some information that is currently available will no longer be available to trade union negotiators who customarily search the records.
It is no use the Minister's saying, as he did in other respects, that the company records are irrelevant to trade union negotiators, to the work of investigative journalists or to the public as a whole, because the historic information is frequently of the greatest importance. A good deal of that information will not be made available in future because the companies, in the event, will be the arbiters of what is to be disclosed and of the extent of the disclosure.
How did the Government arrive at these strange conclusions? We have received scant information from the Minister. He said, in one remarkable intervention, that company law provisions must be limpid, clear and simple

Mr. Eyre: indicated dissent

Mr. Davis: If the Minister disagrees, I shall have to find the reference, because it will be relevant to many other debates on the Bill. I think he said that it was an aim—that the provisions had to be made limpid, clear and simple—but that it could not always be achieved. He has certainly not achieved it. The Bill is so complicated that it will tax the ingenuity of professional advisers beyond all reason, and it will cost the public a great deal of money for professional advisers to exercise their ingenuity and skill in advising their clients.
When the Minister says these strange things, on what evidence are they based? What surveys has he undertaken? No hon. Member is more conscious than the Minister of the need for surveys. Nobody is more diligent about going down back streets and talking to people about whether a business names register is needed than the hon. Gentleman, who sits so benignly on the Government Front Bench. We all love him. But I ask him to tell us what evidence was examined. What surveys did his officials undertake?
I should rather see them at work in the Department of Trade than going down all those dusty roads to carry out these funny surveys of which he is so fond. Did they do anything in this instance? Did they question the CBI? Did they look at any statistical information that might be relevant? The Minister was very coy about that when we were discussing the matter in Committee.
The Minister is fond of saying that all these provisions are designed to secure great savings and an avoidance of bureaucracy. What savings does he envisage will be achieved? I argued in Committee that the benefits that he seeks to confer are likely to be largely cosmetic. One very large firm of accountants with which I have conferred in this matter—a company of the highest reputation in the profession and with no political axe to grind—argues that companies within the particular categories might have to spend rather more money, because they will require to have audited accounts. Banks and the tax authorities will require audited accounts from them. Creditors might require audited accounts from them if there is to be some realistic discussion about debts. So what will be the saving at the end of the day?
It is perfectly true that some companies which may wish to hide certain information from the public at large will


take advantage of the provisions of the Act and publish abridged accounts, despite the additional cost in which they might be involved. But I do not believe the argument that the Minister repeatedly adduces about the onerous nature of the task that companies have to undertake in publishing the information which they are currently required to publish at Companies House. I do not accept that their task is so appalling or so difficult. Indeed, I wonder whether many companies made representations to him, within the spheres that we are discussing, about reducing those tasks.
I expressed another anxiety in Committee. I received no answer from the Minister, so I return to the question. If companies seek some advantage in non-disclosure and are prepared to face the additional cost of the Government's requirements—I believe that that is what will happen in practice—might there not be a possibility that companies will be prompted to fragment in order to take advantage of the lower thresholds related to disclosure?
I realise that there is provision affecting companies which are linked to a holding company, but it is perfectly possible for separate entities to be established and to take advantage of the framework of the Bill. That would compound the secrecy which I believe is implicit in the consequences of the Government's proposals.
The Government have also used the argument that there is information which companies wish to hide from their competitors and that it is therefore undesirable that they should be compelled to publish the information at Companies House. In that respect, the Minister seeks to have the argument both ways. On the one hand, he has argued that the information is largely irrelevant to the public interest because it is historical. On the other hand, he argues that competitors, particularly international competitors, will be deeply interested in it. He cannot have it both ways.
What evidence is there that the information which companies have had to publish hitherto has been gravely damaging to their competitive abilities? What requests have been made by what would now be described in the Minister's proposals as small and medium-sized companies to carry out the change on those grounds? Does he really think that competitors will be persuaded one way or the other or will be tremendously assisted by the information which they now obtain? As my hon. Friend the Member for Coventry, North-West (Mr. Robinson) forcefully pointed out in Committee, competitors are interested in the state of industrial relations which may beset a company at any given time. They want to discover secret processes and new developments and new processes. They are far more interested in those matters than in the formalities of accounting.
The burden of proof in establishing the need for change is firmly on the Minister's shoulders. In my submission, he has not come within a hundred miles of discharging that onus in our debates so far. In a large area of that which is within the definition prescribed in clause 8, information which is important to creditors, to outside interests, to trade unionists and to the public will not be disclosed or will be abridged. A mask will be placed over it. That is not right. Secrecy is a bad criterion for business and a bad

criterion for management. Yet it is one for which the Government have opted, and they have failed to indicate to the House the grounds upon which they have so opted.

Mr. James Hill: My hon. Friend the Minister wi11 realise that it is a matter of opinion what is a small, medium or large business. My experience in business, mainly in small business, suggests to me that the figures at which he has arrived are fairly sensible. To my mind, it would certainly be a small business which employed 50 or fewer staff. That seems very much a commonsense view. Turnover may be in penny washers or in items of considerable value, but I do not think that these days £1.4 million is a high turnover. The balance sheet must not exceed £700,000.
If the amendments were accepted, the paper work, the bureaucracy and the amount of money that the companies involved would have to spend on additional staff to produce all these statistics would be incredible. I have operated a small business for many years. Certainly a turnover of £1.4 million is no indication of a large business. For the medium-sized business, turnover must not exceed £5.75 million; that is about right. We wish this legislation to date itself for at least another three to five years. Regardless of what the hon. Member for Hackney, Central (Mr. Davis) has said about the figures of 50 and 250 staff for small and medium-sized businesses, I hope that my hon. Friend will resist the amendments, because if there is one thing that small businesses do not need at this time it is further paper work or further reasons to take on additional staff to advise the Department.

Mr. Eyre: The amendments relate to the accounting exemption provisions of the Bill. I was, frankly, disappointed when the Opposition tabled them, as I believe that both the nature and the extent of the exemptions have been widely welcomed. Taking the profession as a whole, I do not accept the view of the hon. Member for Hackney, Central (Mr. Davis) about accountants. Moreover, for reasons which I shall make clear, I strongly disagree with the views that he expressed about the role and relationships of small businesses.

Mr. Clinton Davis: The CCAB strenuously opposed the criteria laid down in the 1979 Green Paper. Did it not continue to oppose the Government's proposals, particularly when they were extended in the Bill?

Mr. Eyre: There were more than 150 responses to the Green Paper, meetings with the CBI, the CCAB, the Law Society, chambers of commerce, the Institute of Directors and bodies representing small businesses. The overall result of those consultations was approval of the necessarily complicated balance which the Government have to strike in determining these matters.

Mr. Clinton Davis: I am obliged to the hon. Gentleman. Will he answer my question? What was the view of the CCAB? I am not interested in the other 150. I do not know who they were. I want to know about the CCAB.

Mr. Eyre: As the hon. Gentleman knows, it is not customary to disclose precise details of consultations with bodies of this kind. We are most grateful to the CCAB for the tremendous amount of consultative work it did in assisting us. I do not think that it is accurate for the hon.


Gentleman to explain the CCAB's views on the total balance struck in these complicated matters in the terms that he did.
I shall explain my reasons for disagreeing so strongly with some of the views expressed by the hon. Gentleman today. As I said when we debated this matter in Committee, the Government regard these proposals as misguided and unacceptable because they would significantly reduce the number of small and medium-sized companies able to take advantage of the accounting exemptions available to companies listed in clause 6.
I am most grateful to my hon. Friend the Member for Southampton, Test (Mr. Hill), who made a number of strong practical points in referring to the definition of small businesses. I agree entirely with the view that he expressed. 
5 pm
Our policy is to assist the smaller company sector wherever it is possible and reasonable so to do. Thus, the thresholds for determining the size of small and medium companies for this purpose have been set at virtually the maximum permitted by the fourth directive for the classification of such companies in order that the maximum number of companies can take advantage of the accounting exemptions. This will help to protect their competitive positions in relation to larger companies and groups. However, under the amendments, companies would have to be very much smaller indeed before they could take advantage of the exemptions.

Mr. Clinton Davis: The Minister says that this will enable such companies to protect their interests against larger groups. What does he mean? What evidence is there to support that proposition? The Minister makes many bare assertions that are backed up by no evidence.

Mr. Eyre: If the hon. Gentleman contains himself, I shall explain what I mean by these exemptions; but he knows very well, and it is only his prejudice that does not permit him to take account of the arguments deployed earlier.
In response to the thrust of the hon. Gentleman's arguments, there are several points that need to be explained about the accounting exemption provisions. First, they relate only to what is filed with the Registrar of Companies. All companies are still required to draw up full accounts for shareholders. That is a perfectly proper provision, and these are the accounts on which auditors pronounce a true and fair view. The modified accounts filed with the registrar are not required to give such a true and fair view, although safeguards are available in the form of a directors' statement and supplementary auditors' report.
Secondly, we accept that the provision of modified accounts may involve some additional cost to the company, but we consider that the company concerned should be allowed to judge whether that cost is disproportionate to the longer-term cost of disclosing information that might be harmful to its competitive position. I maintain that the requiring of an audit is a right and proper decision that is very much in the interest of company shareholders as well as the proper arrangement for credit. At the same time, we acknowledge the special need of a company to protect confidential information, and it need not disclose that information in a way that would harm its competitive position. 

Nor do the exemptions affect the provision of information to major creditors who may well require full accounts before giving credit, but this is a matter between the company and the provider of credit.

Mr. Clinton Davis: We are coming to the end of this debate, and this point is at the heart of the matter. I am perturbed by what the Minister has just said, because it appears that the modified accounting system could be more expensive. It will be left to the company to decide whether it is in its overall interest to provide abridged accounts, which would be more expensive, or to file the full accounts. He has also said that the modified accounts are not required to give a true and fair view. We said that in Committee. Is it not right to say that the company to be the sole arbiters of what is to be made available to the public? Can it not hide behind the guise of abridged accounts other information which is not strictly harmful to its competitive ability?

Mr. Eyre: The hon. Gentleman is exaggerating this out of proportion. As I have said, if abridged, the accounts that are filed would be accompanied by the directors' statement and supplementary auditors' reports. That completely answers the hon. Gentleman's point. The point that I made about the preparation of these more limited accounts is entirely reasonable, because it will be for the company to decide whether it wishes to incur the cost of producing abridged accounts. It will do so if it is in its commercial interest or if its competitive position may be harmed. That is a perfectly reasonable decision for the company to make, but for the reasons that I have explained it in no way prejudices the public situation.
We have attempted to strike a balance between the various parties who have an interest in the accounts information. We believe that the package in the Bill in relation to both the criteria we have set and the exemptions we have given is fair to all parties. If medium-sized and small companies wish, they will be able to file abbreviated accounts. We feel that such an approach fully justifies our enabling as many companies as possible, subject, of course, to the fourth directive constraints, to take advantage of exemptions. The hon. Gentleman is trying to have it both ways by saying that if the disclosure advantages prove to be popular it will lead to fragmentation. That is an exaggerated view. The disclosure provisions will not lead to fragmentation nearly as much as would the two amendments, which would do a lot more harm in that respect.
We have struck a balance. For medium-sized companies, the exemptions are relatively modest. In particular, such companies are permitted—not required—to omit a breakdown of their turnover in the accounts filed with the registrar. Nevertheless, the exemptions are important to a number of medium-sized companies, particularly those engaged in one-product lines where knowledge of turnover can be of significant commercial advantage to large competitors or groups which, because of the diversity of their operations, will not give a smaller company similar beneficial information.

Mr. Clinton Davis: What evidence has been forthcoming about damage to the competitive position of companies as a result of the present requirements of the law?

Mr. Eyre: The hon. Gentleman will know that a number of representations were received from companies


precisely in that position. They made the perfectly fair point that by having one main line of production the accounts could reveal information which could be unfairly helpful to competitors and damaging to their interests. That point was fairly and properly taken into account by the Government in determining the accounting rules relating to medium-sized companies.
These exemptions are important to a number of medium-sized companies. We consider that we were quite justified in setting the thresholds as high as that permitted by the directive, so that the maximum number of our medium-sized companies could take advantage of the exemptions if they so wished.
The total package of exemptions contained in the Bill has been arrived at only after extensive consultation. Naturally, there were differences of view, but we believe that the overall package meets the concerns of smaller companies while catering adequately for others which have an interest in the accounts. In short, we believe that the balance struck is fair to all parties.

Mr. Clinton Davis: If the Minister's argument is that small and medium-sized companies may have their competitive position eroded by revealing information, what is the position of large companies? After all, much of our export trade and much of Britain's ability to perform in the industrial world is undertaken by extremely large enterprises. Is the Minister arguing that they should be entitled to exemption from disclosure as well?

Mr. Eyre: The hon. Gentleman is again questioning basic principles in a way that surprises me after our debates. He knows that one purpose of the directives is harmonisation with the EEC market, which is generally accepted. The harmonisation measures in the second and fourth directives are regarded as reasonable. The harmonisation that we have carried out in company law is proper and justifiable, even with the complexity that the hon. Gentleman complained of. We believe that it is justified in the long-term interests of companies and of industrial and commercial activity.
Within the total situation, which relates to big companies operating within the market, competition and free trade are a valuable stimulus, but we have said that we shall take special account of the difficulties of medium and small companies and make special provision for them. It is that consideration that the hon. Gentleman carps about. He is wrong to do so. He is taking a very limited view. The balance that we have struck and the provisions that we have made which are favourable to medium and small companies are entirely justified and will be very valuable in the long run.

Sir Albert Costain: Would not the amendment of the hon. Member for Hackney, Central (Mr. Davis) stop small companies expanding? It is part of our policy to cure unemployment by helping small companies to expand. Perhaps the hon. Gentleman is putting forward the amendment to maintain the unemployment figures so that he can have something to shout about.

Mr. Eyre: I agree, and I appreciate my hon. Friend's intervention. The hon. Gentleman shows that he does not realise the enormous contribution that small and medium

companies can make to our economy, to the creation of new jobs and to progress and development generally. He makes a serious mistake in putting down the amendment and pursuing his arguments.
Finally, I make the same point as I made in Committee. The thresholds proposed in the Opposition amendments would very likely put our companies at a competitive disadvantage with certain of their European counterparts which are likely to adopt the maximum threshold allowed by the directives. It is therefore important that the levels should be kept as high as possible, as we have done in clause 8.
Amendment No. 176 is put down because of references to the complicated nature of clause 8(5) and (6), which I admit are complex. As I have said, the implementation of the second and fourth directives, which are of long-term value to our position in the EEC, are inevitably complex, but by doing my duty in the 1980 Act and in this Bill to implement the legislation I am taking steps along the road to worthwhile harmonisation, which will be of benefit in the long term to our commercial and industrial structure.
The concept introduced by article 11 of the directive whereby the fact of a company exceeding or ceasing to exceed the thresholds will affect the application of the accounting exemptions only if it occurs in two consecutive financial years in itself raises complex issues. One could not have dealt with such complicated circumstances without complicated provisions. However, the initial proposition that a company must comply for two consecutive financial years is dealt with fairly simply in clause 8(1). The complexity arises only when a company changes category in a third and possibly a fourth year also, and subsections (5) and (6) of clause 8 are necessary to deal with the complexity. They allow for the flexibility of changing circumstances, so that a company can pass from one category to another if its trading circumstances so require and justify it in the company's interests.
5.15 pm
For the reasons that I have given, I ask the hon. Gentleman to consider withdrawing the amendment. His reference to medium and small companies does not justify them. If he does not withdraw the amendments, I urge the House to reject them.

Mr. Clinton Davis: It is a bit rich for the Minister to accuse me of not caring about the contributions that small and medium-sized companies make to this country, when his Government have destroyed the hopes of many people in small and medium-sized companies on a scale hitherto never experienced. His care about small companies is minuscule. In fact, he wishes to promote secrecy. Listening to him, one would assume that small companies were going into bankruptcy on such an enormous scale because they had to reveal information to Companies House. If he believes that, he will believe anything.
The hon. Gentleman has not answered my arguments in a number of material particulars. He says that representations were made to the Department, presumably on the thresholds to be employed. He has not begun to disclose the nature of the information. He has not told us whether the Government have checked on it. As far as we know, he has undertaken no surveys.
Most surprising of all, the hon. Gentleman concedes that the modified accounting procedures can be more expensive for small companies. They will have to provide to their creditors in some instances, to their bankers in


others and to the tax authorities in others full audited accounts. As I said before, they will therefore be the sole arbiters of what is to be disclosed.

Mr. Eyre: If a company wished to incur extra professional expense in providing abbreviated accounts, it would do so only in circumstances that were to its commercial advantage. As that was the point in making the provision, does the hon. Gentleman not see the good sense of it?

Mr. Davis: What may be to a company's commercial advantage may not necessarily be in the public interest. Does the Minister not see that? Over the years a great deal of information has been ferreted out in investigation after investigation at Companies House, because information has to be properly filed—information which I imagine the Minister was interested to receive from time to time—and that may not be in the commercial interest of the company concerned. Is there not another motive? Companies may not wish to reveal information because they do not believe that it may be considered to be conducive to the public good.

Mr. Eyre: The hon. Gentleman is exaggerating terribly. For years there was a system of exempt companies that did not register any information. Progressively, more information has been required, and the amount of information now to be provided by small companies is entirely reasonable in the public interest. The essential information supplied is perfectly adequate in the public interest and enables a small company in particular circumstances to protect its competitive position if it is reasonable to do so but, I emphasise, without prejudice to the total disclosure of information justified in the public interest.

Mr. Davis: The Minister cannot have it both ways. At the end of the day he will have his way, but he must realise that in practice some companies, sheltering under the mantle of not revealing matter that may be damaging to their competitive interests, will carry out abuses by not revealing information that does not genuinely fall under that head. My concern is that the Minister is enabling far too extensive a number of companies to obtain that sort of haven. I do not want that to happen.
The hon. Member for Folkestone and Hythe (Sir A. Costain) made an intervention, I think, for the first time in these debates. I do not wish to do the hon. Gentleman an injustice: he is an old friend of mine. He has intervened in other debates in which I have taken part. I think, however, that he would have done better not to have intervened today. He said that my proposals would stop small companies expanding. Does he really think that a small company will be deflected from expanding because of a requirement to carry out the current law on the disclosure of accounts? The hon. Gentleman is much too wise to believe that.

Sir Albert Costain: Small companies are worried about the accounting side. That is my practical experience. They are scared to death of it. It is wrong that they should have to take on extra staff for it.

Mr. Davis: The hon. Gentleman is wrong. Companies will have to do so in any case. They will need to have audited accounts available. All that they will be given is an option to file abridged accounts at the companies registry rather than the full accounts that they will need to

have available anyway. What extra work is involved? As the Minister says, they could be going to more expense. He is providing a cloak for the avoidance of disclosure which, in the higher company echelons, is wrong.
The Minister has, in effect, conceded that his proposals are to a large extent cosmetic and to some extent likely to be damaging to the public interest. I do not believe that he has carried out the burden of proof that falls on him in proposing this change to establish it beyond reasonable doubt. I believe that open government is desirable. It should be extended to companies. There lies the difference between the Government and the Opposition.
The Government do not believe that there should be available to the public fully information that is relevant and that can be tested against the criterion of being true and fair to the public, to employees and to society as a whole. The Government do not, in fact, believe in industrial democracy. That is one of the arguments that relates to what we are discussing. There is a distinction between the Opposition believing in open government and the Government believing in secrecy. I believe that secrecy is a bad counsellor for business, for management and for industrial relations. I have therefore no hesitation in asking my hon. Friends to divide against the Government.
Question put, That the amendment be made:—

The House divided: Ayes 142, Noes 189.

Division No. 305]
[5.23 pm


Allaun, Frank
English, Michael


Archer, Rt Hon Peter
Evans, loan (Aberdare)


Ashton, Joe
Ewing, Harry


Atkinson, N.(H'gey,)
Faulds, Andrew


Bagier, Gordon A.T.
Fletcher, Ted (Darlington)


Bennett, Andrew(St'kp't N)
Ford, Ben


Bidwell, Sydney
Forrester, John


Booth, Rt Hon Albert
Foulkes, George


Boothroyd, Miss Betty
Garrett, John (Norwich S)


Bottomley, Rt Hon A.(M'b'ro)
Garrett, W. E. (Wallsend)


Bradley, Tom
Graham, Ted


Bray, Dr Jeremy
Grant, George (Morpeth)


Brown, Hugh D. (Provan)
Hamilton, W. W. (C'tral Fife)


Buchan, Norman
Harrison, Rt Hon Walter


Callaghan, Rt Hon J.
Hattersley, Rt Hon Roy


Callaghan, Jim (Midd't'n &amp; P)
Haynes, Frank


Campbell-Savours, Dale
Healey, Rt Hon Denis


Canavan, Dennis
Home Robertson, John


Carmichael, Neil
Homewood, William


Cartwright, John
Hooley, Frank


Clark, Dr David (S Shields)
Howell, Rt Hon D.


Cocks, Rt Hon M. (B'stol S)
Hoyle, Douglas


Coleman, Donald
Huckfield, Les


Concannon, Rt Hon J. D.
Hughes, Robert (Aberdeen N)


Conlan, Bernard
Hughes, Roy (Newport)


Craigen, J. M. (G'gow, M'hill)
Janner, Hon Greville


Crowther, Stan
Jay, Rt Hon Douglas


Cryer, Bob
John, Brynmor


Cunliffe, Lawrence
Johnson, Walter (Derby S)


Cunningham, G. (Islington S)
Jones, Rt Hon Alec (Rh'dda)


Cunningham, Dr J. (W'h'n)
Jones, Barry (East Flint)


Dalyell, Tam
Kerr, Russell


Davies, Rt Hon Denzil (L'lli)
Lambie, David


Davis, Clinton (Hackney C)
Lamond, James


Davis, T. (B'ham, Stechf'd)
Leadbitter, Ted


Deakins, Eric
Lewis, Arthur (N'ham NW)


Dean, Joseph (Leeds West)
Lewis, Ron (Carlisle)


Dewar, Donald
Lyon, Alexander (York)


Dixon, Donald
Lyons, Edward (Bradf'd W)


Dormand, Jack
Mabon, Rt Hon Dr J. Dickson


Douglas, Dick
McCartney, Hugh


Dubs, Alfred
McDonald, Dr Oonagh


Dunn, James A.
McElhone, Frank


Dunwoody, Hon Mrs G.
McGuire, Michael (Ince)


Eadie, Alex
McKay, Allen (Penistone)


Eastham, Ken
MacKenzie, Rt Hon Gregor




NOES



Alexander, Richard
Fisher, Sir Nigel


Ancram, Michael
Fletcher, A. (Ed'nb'gh N)


Aspinwall, Jack
Fletcher-Cooke, Sir Charles


Atkins, Rt Hon H.(S'thorne)
Fookes, Miss Janet


Atkins, Robert(Preston N)
Forman, Nigel


Baker, Kenneth(St.M'bone)
Fowler, Rt Hon Norman


Baker, Nicholas (N Dorset)
Fraser, Peter (South Angus)


Beaumont-Dark, Anthony
Freud, Clement


Beith, A. J.
Gardiner, George (Reigate)


Bell, Sir Ronald
Garel-Jones, Tristan


Bendall, Vivian
Goodhew, Victor


Bennett, Sir Frederic (T'bay)
Goodlad, Alastair


Benyon, Thomas (A'don)
Gorst, John


Berry, Hon Anthony
Gower, Sir Raymond


Biggs-Davison, Sir John
Gray, Hamish


Blackburn, John
Greenway, Harry


Bonsor, Sir Nicholas
Griffiths, Peter Portsm'th N)


Boscawen, Hon Robert
Grimond, Rt Hon J.


Bottomley, Peter (W'wich W)
Gummer, John Selwyn


Braine, Sir Bernard
Hamilton, Michael (Salisbury)


Brinton, Tim
Hannam, John


Brown, Michael(Brigg &amp; Sc'n)
Haselhurst, Alan


Bryan, Sir Paul
Hawkins, Paul


Budgen, Nick
Hawksley, Warren


Burden, Sir Frederick
Hayhoe, Barney


Butcher, John
Henderson, Barry


Cadbury, Jocelyn
Higgins, Rt Hon Terence L.


Carlisle, John (Luton West)
Hill, James


Carlisle, Kenneth (Lincoln)
Hogg, Hon Douglas (Gr'th'm)


Carlisle, Rt Hon M. (R'c'n)
Holland, Philip (Carlton)


Chapman, Sydney
Hordern, Peter


Clark, Sir W. (Croydon S)
Hunt, David (Wirral)


Clarke, Kenneth (Rushcliffe)
Hunt, John (Ravensbourne)


Cockeram, Eric
Jessel, Toby


Colvin, Michael
Jopling, Rt Hon Michael


Cope, John

Kaberry, Sir Donald


Costain, Sir Albert
Kershaw, Sir Anthony


Cranborne, Viscount
King, Rt Hon Tom


Dickens, Geoffrey
Knight, Mrs Jill


Dorrell, Stephen
Knox, David


Dover, Denshore
Lawrence, Ivan


Dunn, Robert (Dartford)
Lee, John


Eden, Rt Hon Sir John
Lennox-Boyd, Hon Mark


Edwards, Rt Hon N. (P'broke)
Lloyd, Ian (Havant &amp; W'loo)


Eggar, Tim
Lloyd, Peter (Fareham)


Eyre, Reginald
Lyell, Nicholas


Fairgrieve, Sir Russell
Macfarlane, Neil


Faith, Mrs Sheila
McNair-Wilson, M. (N'bury)


Fell, Anthony
McQuarrie, Albert



Fenner, Mrs Peggy
Major, John


Finsberg, Geoffrey
Marlow, Antony



Mates, Michael
Shaw, Giles (Pudsey)


Mather, Carol
Shaw, Michael (Scarborough)


Maude, Rt Hon Sir Angus
Shepherd, Colin (Hereford)


Mawby, Ray
Sims, Roger


Mawhinney, Dr Brian
Smith, Dudley


Maxwell-Hyslop, Robin
Speller, Tony


Mellor, David
Spence, John


Meyer, Sir Anthony
Spicer, Jim (West Dorset)


Miller, Hal (B'grove)
Stainton, Keith


Mills, lain (Meriden)
Stanbrook, Ivor


Moate, Roger
Stanley, John


Monro, Sir Hector
Steel, Rt Hon David


Morgan, Geraint
Steen, Anthony


Morrison, Hon C. (Devizes)
Stevens, Martin


Morrison, Hon P. (Chester)
Stewart, Ian (Hitchin)


Mudd, David
Tapsell, Peter


Murphy, Christopher
Taylor, Teddy (S'end E)


Myles, David
Tebbit, Rt Hon Norman


Neale, Gerrard
Temple-Morris, Peter


Needham, Richard
Thomas, Rt Hon Peter


Nelson, Anthony
Townend, John (Bridlington)


Neubert, Michael
Townsend, Cyril D, (B'heath)



Newton, Tony
Trippier, David


Onslow, Cranley
Trotter, Neville


Osborn, John
van Straubenzee, Sir W.


Page, John (Harrow, West)
Viggers, Peter


Page, Richard (SW Herts)
Waddington, David


Pattie, Geoffrey
Wainwright, R.(Colne V)


Peyton, Rt Hon John
Walker-Smith, Rt Hon Sir D.


Pollock, Alexander
Wall, Sir Patrick


Prentice, Rt Hon Reg
Waller, Gary


Price, Sir David (Eastleigh)
Warren, Kenneth


Proctor, K. Harvey
Watson, John


Pym, Rt Hon Francis
Wells, John (Maidstone)


Rathbone, Tim
Wells, Bowen


Rees, Peter (Dover and Deal)
Wheeler, John


Rees-Davies, W. R.
Wickenden, Keith


Renton, Tim
Wiggin, Jerry


Rhodes James, Robert
Wilkinson, John


Rhys Williams, Sir Brandon
Williams, D.(Montgomery)


Roberts, Wyn (Conway)
Wolfson, Mark


Ross, Stephen (Isle of Wight)
Young, Sir George (Acton)


Rost, Peter



Royle, Sir Anthony
Tellers for the Noes:


Sainsbury, Hon Timothy
Mr. Peter Brooke and


Scott, Nicholas
Mr. Donald Thompson.

McMahon, Andrew
Skinner, Dennis


McNally, Thomas
Snape, Peter


McTaggart, Robert
Soley, Clive


Marshall, Jim (Leicester S)
Spearing, Nigel


Mason, Rt Hon Roy
Spriggs, Leslie


Maxton, John
Stewart, Rt Hon D. (W Isles)


Maynard, Miss Joan
Stoddart, David


Milian, Rt Hon Bruce
Stott, Roger


Mitchell, R. C. (Soton Itchen)
Strang, Gavin


Morris, Rt Hon C. (O'shaw)
Thomas, Mike (Newcastle E)


Mulley, Rt Hon Frederick
Thorne, Stan (Preston South)


O'Halloran, Michael
Walker, Rt Hon H.(D'caster)


O'Neill, Martin
Watkins, David


Orme, Rt Hon Stanley
Welsh, Michael


Owen, Rt Hon Dr David
Whitlock, William


Palmer, Arthur
Wigley, Dafydd


Parry, Robert
Willey, Rt Hon Frederick


Powell, Raymond (Ogmore)
Williams, Rt Hon A.(S'sea W)


Race, Reg
Wilson, Gordon (Dundee E)


Richardson, Jo
Wilson, William (C'try SE)


Roberts, Albert (Normanton)
Winnick, David


Roberts, Ernest (Hackney N)
Woolmer, Kenneth


Robertson, George
Young, David (Bolton E)


Rooker, J. W.



Sandelson, Neville
Tellers for the Ayes:


Sever, John
Mr. George Morton and


Silkin, Rt Hon J. (Deptford)
Mr. James Hamilton.

Question accordingly negatived.

Mr. Martin Stevens: I beg to move amendment No. 174, in page 15, line 45, at end insert—
'(13) Notwithstanding sub-section (1) of section 161 of the Companies Act 1948 (Disqualifications for appointment as auditor), but subject to sub-sections (2) to (4) thereof, a person shall be qualified for appointment as auditor of a small or medium-sized company as defined in section 8 (2) and (3) of this Act who is a member of the Society of Company and Commercial Accountants Limited (by Guarantee), the British Association of Accountants and Auditors Limited (By Guarantee), or of any other body of accountants established in the United Kingdom and for the time being recognised for the purposes of this provision by the Department of Trade and who is in receipt of a valid Practising Certificate issued by that member's qualifying body.'.
Under section 161 of the 1948 Act professional bodies may apply for recognition as auditors of public companies and private limited companies. Only two bodies are currently recognised—the Institute of Chartered Accountants in England and Wales, and its equivalent bodies in other countries, and the body representing certified accountants. No professional body has applied for, or been accorded,. recognition since the 1948 Act was passed.
The British Association of Accountants and Auditors was established in 1923, the Institute of Company Accountants was set up in 1928, the body representing cost and industrial accountants was set up in 1936, and the


Society of Commercial Accountants was established in 1942. Three of those bodies merged in 1974 to form the Society of Company and Commercial Accountants and were joined in 1980 by the British Association of Accountants and Auditors.
The joint organisation has 10,000 members and 5,000 student members—about the same number as belong to the body representing certified accountants. Not many practise as public auditors—only about 2,000—and they cannot act as auditors to public companies, but only to partnerships, sole traders and non-limited companies, many of which, however, are considerably larger than the small and medium-sized companies that we are discussing.
I am asking my hon. Friend the Under-Secretary to consider broadening the choice of auditors for small and medium-sized companies. He will say—and I know that he is sympathetic to the arguments that I am advancing today—that auditors of public companies and private limited companies must have and must be seen to have the best possible qualifications. The Society of Company and Commercial Accountants has taken great strides in recent years to demonstrate that its members have such qualifications. It issues practice regulations and a code of conduct. It has its own disciplinary committee. It has a very full examination procedure, which involves 60 hours of examinations. It is pledged to accept the European Commission's eighth directive on professional training. Incidentally, it was stated in a number of publications that the British Association of Accountants and Auditors, which has now joined the society, withdrew an application for recognition. In fact, it was not withdrawn; it lapsed when the association merged with the society.
The argument could be advanced—I know that my hon. Friend would rebut it vigorously—that we should develop one body for auditing and another body for company accounting, the reason being that in looking for qualifications the experience of the auditor is at least as important as the basic training that he has received. The auditing of company accounts for small and medium-sized organisations calls ideally for a fairly wide experience in that field.
One could ask "Why do not young men and women wishing to become professional auditors join the two existing bodies? Why should they join the society?" There are, of course, differences in training. The Institute of Chartered Accountants in England and Wales requires that a candidate should serve articles. This is not so with certified accountants. Nor do certified accountants insist on candidates being university graduates, although the institute would like to insist, and hopes to insist, on a graduate-only entry. The Institute of Chartered Accountants of Scotland already does so.
The certified accountants ask that candidates should undertake a period of training with a principal. They are trained to work in industry and to work as auditors and accountants for larger companies. The society does not require graduate candidates. It accepts the need for a master-pupil period, but treats its candidates as persons who are capable of earning their living in the ordinary way during this period.
Incidentally, when we talk about a graduate entry, no one questions what the subject is in which the graduate should have earned his degree. It may therefore be thought that the requirement or a future requirement from the institute for a graduate entry may not perhaps alter the

professional character of its members as substantially as it may hope. The society also takes many overseas students.
5.45 pm
So the society is fulfilling an important role. It is increasingly fulfilling the role of training—I hope that I have shown that it is quite a severe and rigorous programme—young men and women do not have university degrees and who do not want to go through a period of articles. It is clearly right, in my opinion, that our country should offer this alternative channel for entry into the profession.
The society would claim that it offers special knowledge of smaller company accounts. It does not aim to audit the accounts of enormous public companies. It would accept that, if recognition were given in the terms of my amendment, it would mean that it would be recognised not for those purposes but only for the purpose of auditing the smaller companies which we are now discussing.
It is spurious to argue that smaller companies now have the benefit, and should not be denied the benefit in the future, of the services of chartered and certified accountants whose qualifications are better than those of members of the society. After all, smaller companies never see the principals. They see only the articled clerks. Many of the big firms of chartered accountants have so many principals that the currency in that respect may have been debased.
We can also argue that the House wishes to help the smaller business man, and the smaller accountant is himself a smaller business man. In granting recognition to the society, we should be ensuring, first, that the smaller business man would have access to principals where he now does not; that he would have access to the services of auditors with a much more genuine knowledge of the needs of small companies than often happens under the present arrangements; and that the door would be held open for candidates for the profession who cannot or do not wish to obtain university degrees or to serve a period of articles.
It would not be very difficult to confer recognition on the restricted terms that I have described, and I greatly hope that my hon. Friend may see fit to accept the amendment and confer the recognition that I am seeking.

Mr. John Fraser: I strongly support the amendment standing in the name of the hon. Member for Fulham (Mr. Stevens). It is about time that the Government made a move to enfranchise a much wider body of people in accounting and auditing. I say that for a number of reasons.
There is always a danger with qualifications. The current fashion seems to be to get a job, give it a name, invent a qualification for it, and then make the doing of the job exclusive to those who carry the qualification. Then, if too many people are getting in, one introduces a degree or diploma as a necessary preliminary, even before people start training in the profession. Professional life becomes rather like an Olympic high jump. The better that people become, the higher the opening standards.
There are dangers in that. I am not for a moment inveighing against high standards in the professions. They are absolutely necessary. However, one must view with suspicion the possibility that some professions—and,


indeed, the Government—impose too high a standard in terms of those who can audit the books of smaller and medium-sized companies.

Mr. Nicholas Baker: How does the hon. Gentleman square the argument that he is putting now for widening a class of people who advise and have to do with companies with the arguments that were put from the Opposition Benches about the secretaries of limited companies under the Companies Act of last year?

Mr. Fraser: Perhaps I should not go into that matter. There is possibly some inconsistency, but I am advancing a view that I have advanced in the House for a long time and certainly when I was a Minister. The danger exists inside one's own profession. I remember that when I started to become a solicitor one had to have, I think, only O-levels. Then many working-class people seemed to become solicitors, so the requirement was raised to A-levels. Many working-class people went on to get A-levels. So then there was a move inside the profession to make it an all-degree profession. The same trends are present in relation to architecture, and so on. When I was an employment Minister an organisation came to me—I think that they were careers officers—suggesting that a degree should be a necessary pre-qualification for becoming a careers officer. I do not say that it was a majority view.
One must weigh those arguments very carefully and match the necessity for high standards of training and high academic qualifications with the need to have deep practical experience. Sometimes the deep practical experience—I emphasise "sometimes"—is a better qualification than high academic standards.
I am not trying to lay down a rule, and I am certainly not attempting to be anti-academic. I am simply saying that there is a danger in setting standards too high, and there is also the danger of a waste of manpower. A perfectly respectable argument which is put forward by well-known and distinguished members of the accountancy profession is that it is not really necessary to audit the books of some smaller companies at all, and that it is a complete waste of manpower and simply means paying people to do what becomes a routine job. I do not know whether such arguments bear weight, but I believe that we may be excluding necessary manpower by preventing responsible and respectable accountancy bodies from carrying out the audits of books of smaller companies, and taking off them work which they used to perform perfectly adequately.
As the hon. Member for Fulham said, the bodies that he has mentioned have a particularly good record in training people who come from overseas and, I believe, in training those whose chances of getting into some of the other professions are inhibited, perhaps because of family background or educational disadvantage at the beginning. Incidentally, in saying that, I do not wish in any way to reflect upon people who are members of the bodies that the hon. Member has mentioned and who have impressive qualifications and experience. In short, looking at other areas such as the medical profession, one finds grades of qualifications. There are consultants, doctors, sisters, State registered nurses, State enrolled nurses, and so on.

I see no reason why one should not look at a gradation of qualifications to carry out the auditing of the accounts of a company.
I hope that the Minister will make a sympathetic response to the case which has been consistently put to him during this debate and in past debates on Companies Bills.

Mr. Eyre: As I expected, my hon. Friend the Member for Fulham (Mr. Stevens) put his case in an attractive and persuasive style. I am very sorry to have to tell him that I cannot accept his amendment, but I hope that I shall be able to give him some helpful information.
Auditors of companies have to say whether in their view the accounts give a true and fair view and comply with the Acts. Shareholders, creditors and other users of accounts place considerable reliance on the auditor's report. Shareholders are entitled to place the same degree of reliance on audited accounts regardless of the size of the company concerned. The importance of shareholdings does not vary according to the size of company. For that reason, the Government believe that the auditors of companies of all sizes must have a similar level of qualification.
Shareholders need to know that auditors are properly trained and are subject to proper ethical standards. It is widely accepted that the requirements of the four recognised bodies reflect informed opinion of what is appropriate, but there is no reason why only these four bodies should have recognised status. It is certainly our policy that any accountancy body that has suitable standards will be recognised. It will need appropriate educational requirements. By that, I do not mean a false measure of educational requirements. I take the point made by the hon. Member for Norwood (Mr. Fraser). Such bodies must have appropriate educational requirements, training arrangements and examination standards, as well as ethical rules, disciplinary arrangements, technical standards and procedure—all a necessary part of the professional standards about which we have been talking.
I am certainly ready to give the most careful consideration to any application for recognition. My Department will be glad to discuss the matter in detail with either of the bodies named in the amendment if they wish—the Society of Company and Commercial Accountants and the British Association of Accountants and Auditors.
The hon. Member for Norwood is a solicitor, and he understands the need for high professional standards in these respects. I do not think that his comparison was quite right. He mentioned the medical profession but then moved into other bodies which are not medically qualified. I believe that he dealt with a higher grade, at least of professional distinction, within the medical profession, and then went on to talk about nurses, and so on. I do not think that that argument is quite sustainable in these matters.

Mr. John Fraser: I think that it is very fair. For a long time we used to waste doctors' time in giving them jobs that nurses could perfectly adequately perform by themselves. There is increased recognition of the fact that one can dilute a job. I do not mean that in any pejorative sense. I think that it is a perfectly fair comparison.

Mr. Eyre: I understand exactly what the hon. Member has in mind. I do not think that it was entirely accurate to


put all the people that he mentioned into the category of the medical profession. That is the only point that I am making. Again, I take his point with regard to education. I take my hon. Friend's point about the opportunity to join a body and to qualify and to obtain a full professional qualification. I promise the most careful consideration of any application for recognition.
I also recognise that the British Association of Accountants and Auditors applied for recognition some years ago and has not withdrawn its application. I take my hon. Friend's point. If that association or the Society of Company and Commercial Accountants wishes to pursue this matter, my Department is at their disposal.

Mr. Stevens: I am most grateful for the outspoken and staunch support from the hon. Member for Norwood (Mr. Fraser) and for the friendly response from my hon. Friend the Under-Secretary. I know that both the society and the association will heed the Under-Secretary's words and will be as grateful as I am for the spirit in which they were uttered. As my hon. Friend the Minister is to be the guest of honour, in two or three weeks' time, at the society's annual dinner, I have no doubt that that occasion will afford him the opportunity of learning more about it. It will also afford him an opportunity to heed its aspirations in a more human and relaxed fashion than is possible in the Chamber tonight. I shall ensure that his words are conveyed to the society. No doubt it will take advantage of the invitation that my hon. Friend has extended.
In those circumstances, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Clause 23

INDEX OF NAMES

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Mr. Eyre: I beg to move amendment No. 2, in page 30, line 34, at end add

"or the Industrial and Provident Societies Act (Northern Ireland) 1969.'

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 3.

Mr. Eyre: This amendment will include in the classes of bodies whose names are to form the statutory index to be kept by the Registrar of Companies societies registered under the Industrial and Provident Societies Act (Northern Ireland) 1969.
Amendment No. 3 seeks to prohibit the Secretary of State from removing from the index the names of 1948 Act companies and overseas companies.
Amendment agreed to.
Amendment made: No. 3, in page 30, line 42, after "body', insert

"except any within subsection (1)(a) or (b) above'.—[Mr. Gummer.]

Clause 24

CHANGE OF NAME

Mr. Eyre: I beg to move amendment No. 4, in page 31, line 15 leave out from 'within' to 'period' in line 16 and insert 'such'.

Mr. Deputy Speaker: With this, it will be convenient to take Government amendments Nos. 5, 6 and 7.

Mr. Eyre: Given the substantial amendments already agreed in Committee, these further amendments to the proposed regime for the future control of company names demonstrate the flexible approach that the Government have sought to maintain on this subject. I am grateful for the constructive suggestions that have been made throughout our debates. I am sure that, as a result, we have evolved a framework within which the administration of this particular aspect of company law can proceed more efficiently while maintaining the necessary measures of protection for established commercial interests.
As a result of discussion in Committee concerning the damage that could in certain cases be caused by a company registering a name the same as or "too like" that of another company already on the register, or with a name which has been obtained as a result of misleading information having been given, it was considered that the Secretary of State should have powers to direct a company to change its name as soon as possible. This amendment removes the minimum period which must be given for such change to take place from six weeks to such period as the Secretary of State may specify.
Although the change of name must be made by special resolution of the company and will normally involve the giving of 21 days' notice of the meeting to pass the resolution, nevertheless the proviso to section 141(2) of the 1948 Act makes it clear that this need not always be the case and accordingly we consider that there is no need to specify a minimum period for a change of name.
A further point arises regarding the period during which a change of name could be required. The Bill presently provides that a direction to change a name can be made only within a period of 12 months after the company has been registered by the name in question. We have brought forward amendments to cover the case where a name has been obtained by the provision of misleading information to the Secretary of State.
We consider that a distinction should be drawn between cases involving "identical" and "too like" names and ones involving misleading information being given to the Secretary of State. In the former case we consider that after 12 months a company should be entitled to certainty in its name. In the latter case, which could involve an element of dishonesty, we feel that the power to direct a change of name should be available for as long a period as is reasonably practicable. In these circumstances, we propose that the Secretary of State should be able to exercise his power to direct the company to change its name at any time within five years of the date of registration. Five years has been chosen as a reasonable period during which the registrar will retain pre-incorporation documents.

Mr. John Fraser: The amendments are welcome because they recognise the fears expressed by the Opposition in Committee during debate on the clause. I am grateful for the fact that there is a longer period in which to put right any mischief. Will the Minister confirm something that he may have confirmed in Committee—namely, that he and the registrar will be receptive in informally looking at genuine complaints from members of the public or companies with similar names and that the initiative will not be left entirely to


companies and to the practice of non-company law, such as slander of title? I hope that the Minister and the registrar will be receptive to any genuine weighty complaints that may be brought by members of the public who feel that their business reputations are being damaged by those who have falsely assumed their names and thereby misled the public.

Mr. Eyre: The hon. Member for Norwood (Mr. Fraser) will understand that the registrar cannot accept a legal obligation in this respect. However, the registrar wishes to be as helpful as he can in providing his general service, as well as in the aspect mentioned by the hon. Gentleman. The registrar will want to discharge his duties in as helpful a way as possible.
Amendment agreed to.
Amendments made: No. 5, in page 31, line 26, leave out 'twelve months' and insert 'five years'.
No. 6, in page 31, line 28, leave out from 'within' to 'period' in line 29 and insert 'such'.
No. 7, in page 31, line 32, leave out from 'period' to end of line 35 and insert

'within which the company is to change its name, at any time before that period expires.'.—[Mr. Gummer.]

Clause 29

DISCLOSURE OF NAMES OF PERSONS USING BUSINESS NAMES

Mr. Eyre: I beg to move amendment No. 8, in page 37, line 28, after 'letters', insert
'written orders for goods or services to be supplied to the business,'
The amendment extends the scope of the documents on which the details of persons using a business name must appear to include all written orders for goods or services to be supplied to the business. The amendment arose from a debate in Committee. I appreciate many of the points that were put forward by hon. Members. The amendment represents an improvement to the alternative system, and I hope that it will be welcomed by the hon. Member for Hackney, Central (Mr. Davis).

Mr. Clinton Davis: In so far as one can support an improvement to a hopeless system, I support the amendment.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 9, in page 38, line 3, after 'above', insert
'or which would have been so required but for subsection (3) below'
The amendment clarifies an apparent anomaly regarding the provision of details of proprietors where partnerships of more than 20 persons are concerned. The amendment makes it clear that subsection (2) applies to require details of proprietors to be furnished in writing immediately for partnerships of more than 20 persons to any person with whom anything is done or discussed in the course of a business and who asks for such names and addresses.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 10, in page 38, line 8, leave out 'sent out' and insert 'issued'.
It has been suggested by the Law Society that it would be preferable to avoid the use of different wording when

describing identical actions. I accept the points made by that society and I hope that the House will agree to this amendment.
Amendment agreed to.

Clause 34

PRELIMINARY PROVISIONS

Mr. Eyre: I beg to move amendment No. 11, in page 41, line 14, leave out from 'account)' to end of line 18 and insert

'in the circumstances mentioned below in this section'.

Mr. Deputy Speaker: With this we may discuss Government amendments Nos. 12 and 13.

Mr. Eyre: Before we consider the amendments, it might be helpful if I remind the House of the background to them and in particular of the revised proposals introduced by the Government in Committee.
Section 56 of the 1948 Act deals with the treatment of premiums on issue of shares for cash or otherwise. In certain forms of acquisitions and mergers shares are issued for shares. The application of section 56 in such cases has, since 1948, given rise to two distinct schools of thought. One favours the strict interpretation of section 56, so that share premium account is recognised in all cases and pre-acquisition profits are locked up. The other sees scope for a more liberal interpretation whereby no share premium account may be recognised and pre-acquisition profits remain available for distribution.
In early 1980 a decision in the High Court in the case of Shearer v. Bercain involved a strict interpretation that resulted in fairly restrictive prospective relief from section 56.
In response to proposals, the CBI convened a working party comprising CCAB and Law Society representatives to consider whether a consensus in favour of a broader prospective relief could be established. Such a consensus was established and the proposals were submitted to the Government in June. In essence, the working party proposed, and the Government accepted, that relief from section 56 should be available in the case of any share or share transactions involving the issue of equity shares by one company as a result of which it becomes the holder of 90 per cent. of the equity shares in another company.
The working party made other recommendations which have been taken into account. Apart from the forthcoming regulations, the provisions in the Bill follow closely the CBI working party recommendations.
Clause 35 gives effect to the working party's main recommendation in respect of prospective relief. The retrospective provisions of clause 37 remain largely unchanged.
Clause 36, dealing with infra-group reconstruction, like the previous clause 38, is maintained as providing useful separate circumstances for which relief is to be made available.
Representations have been made to the Department that there is some ambiguity in the wording of clause 34 that may lead to the conclusion that the prospective relief by clauses 35 and 36 is available only in respect of qualifying transactions effected between 4 February 1981—the date of the Bill's publication—and the date of Royal Assent. This is not correct, but the Government have introduced these amendments to clarify the objective of this clause. 


Amendment agreed to.
Amendments made: No. 12 in page 41, line 20, leave out from 'company' to 'only' in line 22 and insert
issues or has issued shares in circumstances to which either of those sections applies, but in the case of an issue which took place before the section in question came into operation'.
No. 13, in page 41, line 27, at end insert—

'(4) References in sections 35 to 37 of this Act to the issuing company are references to the company issuing the shares as mentioned in subsection (2) or (3) above.'—[Mr. Eyre.]

Clause 35

MERGER RELIEF

Mr. Eyre: I beg to move amendment No. 14, in page 41, line 28 at beginning insert—

"Subject to section 36(5) of this Act'.

Mr. Deputy Speaker: With this we may discuss Government amendment No. 15.

Mr. Eyre: These amendments make it clear that clause 36 takes precedence over clause 35 where shares are issued in circumstances in which both clauses would otherwise apply. That is because clause 36 provides slightly more restrictive relief from section 56 of the 1948 Act than that offered by clause 35, to take account of the particular characteristics of intra-group reconstructions.
Amendment agreed to.

Clause 36

RELIEF FROM SECTION 56 IN RESPECT OF GROUP RECONSTRUCTIONS

Amendment made: No. 15, in page 43, line 14 at end insert—

'(5) Section 35 of this Act shall not apply in any case to which this section applies.'.—[Mr. Eyre.]

Clause 37

RETROSPECTIVE RELIEF FROM SECTION 56 IN CERTAIN CIRCUMSTANCES

Mr. Eyre: I beg to move amendment No. 16, in page 43, leave out lines 33 to 36.
This amendment deletes a provision in terms of the retrospective relief from section 56, which limits that relief to any part of the premium on shares issued in relevant circumstances that has been so applied that it does not, at the date of the Bill's publication—4 February 1981—form an identifiable part of the issuing company's reserves.
Amendment agreed to.

Clause 38

PROVISIONS SUPPLEMENTARY TO SECTIONS 35 TO 37

Mr. Eyre: I beg to move amendment No. 17, in page 44, line 2 leave out from first 'shares' to 'to' and insert "or other consideration provided for the shares issued is'.
I am glad to say that this amendment is consequential to the amendments to the merger relief clauses.
Amendment agreed to.

Clause 40

CERTAIN ASSISTANCE FOR ACQUISITION OF SHARES PROHIBITED

Mr. Eyre: I beg to move amendment No. 18, in page 45, leave out lines 22 to 42 and insert—

' —(1) Subject to the following provisions of this section and sections 41 and 42 of this Act, where a person is acquiring or is proposing to acquire any shares in a company it shall not be lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place.

(1A) Subject to the following provisions of this section and sections 41 and 42 of this Act, where a person has acquired any shares in a company and any liability has been incurred (by that or any other person) for the purpose of that acquisition it shall not be lawful for the company or any of its subsidiaries to give any financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.

(2) Subsection (1) above shall not prohibit a company from giving any financial assistance for the purpose of any acquisition of shares in the company or its holding company if—

the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company; and
the assistance is given in good faith in the interests of the company.

(2A) Subsection (1A) above shall not prohibit a company from giving any financial assistance if—

the company's principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of any shares in the company or its holding company or the reduction or discharge of any such liability but is an incidental part of some larger purpose of the company; and
the assistance is given in good faith in the interests of the company.'.

Mr. Deputy Speaker: With this we may discuss Government amendments nos. 19, 21 to 32, 35, 41 and 162.

Mr. Eyre: Clause 40 is included in the Bill to repeal and replace section 54 of the 1948 Act, which prohibits financial assistance by a company for the purchase of or subscription for its shares or those of its holding company, if it has one. The basic purpose of the clause is to redefine that prohibition and to maintain existing exemptions while providing new exemptions.
The new exemptions are intended to take account of the effect of the decisions of the courts in two cases in 1979 and 1980—Belmont Finance Corporation v. Williams Furniture and Armour Hick Northern Ltd v. Whitehouse and others. They drew attention to the breadth of the section 54 prohibition and caused the financial community and its advisers to be concerned that it needed to be interpreted much more widely than had previously generally been thought.
Section 54 had long been criticised as being avoidable by the unscrupulous and an unnecessary inconvenience for the honest. The attention that has been drawn by the recent cases to the breadth of the clause has caused great concern because it is thought that it interferes unnecessarily with many legitimate commercial arrangements, particularly in the sphere of group finance after a new subisidiary has been acquired.
The problem can be illustrated by the case of an acquiring company with a debenture existing before an


acquisition, which has as one of its terms that the assets of all subsidiaries of the acquiring firm will be charged to secure the debenture.
It is considered that the security thus provided by a newly acquired company may fall within the scope of the section 54 prohibition, although the security is purely a consequence of the acquisition and is not instrumental in bringing it about.

Mr. Clinton Davis: I do not ask the Minister to answer my question immediately, but when were the amendments tabled? That is important in relation to the measure of consultation that could have taken place.

Mr. Eyre: I shall have to inquire. I appreciate the importance of the hon. Gentleman's point. There has been considerable and intense concentration on this extremely complex aspect. I hope that I shall be able to assure the hon. Gentleman that much time has been allowed for consideration of what is now the final form of the amendments. My Department has consulted the interests concerned and co-operated with them with the aim of getting this complicated matter as correct as possible.
I shall provide more information in the hope that I can answer the hon. Gentleman's query in greater detail. A subsidiary company may provide funds to its parent, possibly some years after its acquisition, to effect a more efficient disposition of assets within the group or to improve its financial position. The provision of those funds may relieve the parent of indebtedness incurred for the purpose of acquiring the subsidiary, but, if the primary purpose of the subsidiary in providing funds is other than to provide such relief, it is considered that the arrangement should be allowed as a desirable commercial activity.
Intensive consultations have proceeded throughout the passage of the Bill to find a satisfactory form for provisions that will exempt activities and arrangements that are in the interests of an acquired company, its members and creditors and the group and its lenders but will not help an acquired whose sole purpose is to strip an acquired company of its assets to make good his expenditure in his acquisition.
I understand that it may take some time to answer the query raised by the hon. Member for Hackney, Central (Mr. Davis).
The amendments reflect the outcome of the consultations. I am pleased to inform the House that they have the approval of those whom we consulted, including not only those who advise companies on the legality of the proposed arrangement, but—I think it may interest the hon. Member for Hackney, Central—Finance for Industry Limited, which shares the Government's concern to ensure that the obstacle to the management buy-out that section 54 presently represents should be removed. Our consultations on what probably has been the most difficult of all the provisions in the Bill have been detailed and time-consuming. The Government are grateful to those who have contributed.
The most important of the amendments to clause 40 is amendment No. 18. It comprises a more radical restatement of the basic prohibition against a company giving financial assistance and of the exemption for assistance when the primary purpose is not to give assistance for the purpose of the acquisition. The essential change from the provision in the Bill, which follows

closely the words of section 54, is that the reference to "financial assistance" given in connection with acquisition has been dropped. The expression "in connection with" could be interpreted as referring only to financial assistance given after an acquisition, but it has given rise to great uncertainty of interpretation and has been a major element in spreading so wide the net created by the prohibition.
The amendment distinguishes between financial assistance given before or at the same time as an aquisition and that given after the event. Financial assistance given directly or indirectly for the purpose of an acquisition before or at the same time as the acquisition is prohibited in new subsection (1). Financial assistance given after the acquisition to relieve any persons of a liability incurred for the purpose of the acquisition is prohibited by subsection (1)(a). As the offence has now been divided into two, so the defence provided for a company that can show that financial assistance for the acquisition is not its principal purpose has been divided in subsections (2) and (2)(a) to apply respectively to financial assistance before or at the same time as acquisition and after acquisition.
The additional condition, that the assistance is given in good faith in the interests of the company, is retained. The resulting provisions deal with the uncertainties arising from both the Belmont Finance Corporation v. Williams Furniture and the Armour Hick Northern Ltd. v. Whitehouse and others decisions. They will be of considerable help to companies and their advisers and will promote legitimate commercial activity.
Amendment No. 26 introduces two new subsections into clause 40 that complement new subsections (1)(a) and (2)(a), which are concerned with financial assistance after the acquisition. Subsections (6)(a) and (6)(b) provide definitions respectively of incurring a liability for the purpose of an acquisition and reducing or discharging such a liability. Incurring a liability is defined to include any change in a person's financial position, and reducing or discharging the liability is defined as
wholly or partly restoring his financial position".
The amendments make clear that in deciding whether the financial assistance has been given after an acquisition, it is necessary to look at the overall financial position of any person involved. The use of the word "liability" is not confined to the normal strict legal meaning. Given the diversity of ways in which financial assistance might be given, it is considered that that broad definition is essential if the purpose of prohibition in the clause is not simply to be avoided.
Amendment No. 24 deals in the simplest possible terms with the diversity of ways in which financial assistance might arise. It provides a replacement definition of "financial assistance" for that already contained in subsection (6) of the clause, which our continuing consideration and comments of consultees has suggested is not entirely effective in fulfilling its purpose. The amendment provides a simpler formulation. "Financial assistance" is defined as arising by way of gift or guarantee, security or indemnity, release or waiver or
a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when…any obligation of any other party to the agreement remains unfulfilled.
That last provision ensures that financial assistance includes any sort of agreement that affords any form of credit. The exemption in paragraph (b) for an indemnity


in respect of the indemnifier's own neglect or default is to permit a company to indemnify an underwriter of a new issue of the company's shares against neglect or default on the company's part associated with the new issue. That is a normal commercial practice that is unobjectionable and should be allowed to continue.
Amendment No. 25 amends existing paragraph (c) of the definition of "financial assistance" contained in subsection (6). It provides that any financial assistance taking a form other than those specified in amendment No. 24 that reduces the company's net assets to a material extent is financial assistance for the purpose of clause 40. The amendment provides for the case of a company that has no net assets and deems any other financial assistance given by such a company to be relevant for the purposes of the clause. It also makes it clear that the expression "net assets" in that subsection has the same meaning as it has for the purposes of the 1980 Act. That has the effect that the questions whether a company has net assets and whether they are reduced to a material extent must be determined by reference to actual value of assets and liabilities rather than book values.
Amendment No. 27 provides that, for the purposes of subsection (5) only, the question whether net assets are reduced is to be determined by reference to book values. I emphasise that that is for the purpose of subsection (5) only. Subsection (5) restricts any assistance given by a public company under the exemptions in subsection (4) for general lending, which is part of the ordinary course of business, to provision of funds in accordance with an employee share scheme and for lending to employees, and to such assistance as does not reduce net assets or that is provided from distributable profits. In applying the less rigorous standard based on book values, as given in the company's accounting records, the amendment adopts the policy of the European Community's second directive on company law. That is justified in the case of the limited types of payment permitted under subsection (4) that are unlikely to give rise to abuse.
Amendments Nos. 19, 21, 28, 29, 31, 32 and 35 are consequential upon amendment No. 18. 
6.30 pm
Amendment No. 22 applies to the definition of an employee share scheme that is contained in the 1980 Act in clause 40(4). The definition has been lost from subsection (7) as a consequence of amendment No. 27. The purpose of amendments Nos. 23 and 30 is to make clear that a company that has no net assets may not give financial assistance for the acquisition of its own shares by virtue of these provisions. A publicly owned company which has no net assets will have no distributable profits which it can use to give financial assistance. Our policy in permitting financial assistance in these cases is that it should always be found from distributable net assets to protect the interests of creditors.
Amendment No. 41 provides a replacement subsection (8) for clause 42. It provides definitions of the expressions "financial assistance" and "net assets" for the purposes of clause 41. The change is partly consequential upon changes made to earlier amendments to clause 40.
One change of policy has been made—namely, whether a company can be said to have net assets and, if so, to what extent. That is to be determined by reference to book value rather than the actual value of assets and liabilities. 

Clause 41 allows a private company to provide financial assistance if it has net assets. Most private companies are small. It is considered unnecessary for the protection of creditors to require that such companies have assets and liabilities valued before they can provide financial assistance. Reliance on book values provides an adequate basis for determining whether such companies may do so.
Amendment No. 162 deletes regulation 10 from table A of schedule 1 to the 1948 Act. The regulation provides an optional standard form of articles for public companies that largely duplicates the provisions of section 54 of the 1948 Act. Section 54 is repealed by clause 40. The deletion of regulation 10 is consequential.
We have sought by these amendments to clarify and simplify a long-standing provision of company law in a way which retains a necessary prohibition against undesirable activities while allowing reasonable scope for commercial development and flexibility.
I shall answer as speedily as I can the questions posed by the hon. Member for Hackney, Central. The equivalent of clause 40, with a limited new defence to clarify the position, was included in the Bill when it was introduced in another place. The clause was considerably criticised and on Report in another place the Government's spokesman said that the Government were open to persuasion on the appropriate way of dealing with these problems.
In response to that invitation, the Government received a considerable body of representations from a number of organisations and individuals. As a result, the Government introduced in Committee the special relief for private companies in clauses 41 and 42. The clauses were debated on 30 June. At the same time, we added to the list of exclusions in clause 43, an action that has been widely welcomed. I know that the hon. Gentleman and I have vivid memories of the detail of the discussion that took place in Committee.
The amendments before us, on which we held consultations during August and September with representatives of the Law Society, the banks, Finance for Industry Ltd. and those representing certain bodies concerned in management buy-outs, were tabled on 8 October. The purpose of the amendments is further to refine the basic principle of the clauses as tabled in Committee.
Representations were made that the clauses were not as clear as they might be. The hon. Member for Hackney, Central seems surprised. The hon. Gentleman will understand that we are dealing with a difficult matter. The problems have been notorious for many years. I am happy to assure him that those concerned are generally content with the amendments as tabled.
A most tremendous effort has been made to work with the bodies that I have mentioned, which have played such a helpful part in the negotiations. Those bodies include especially the Law Society, the Bar and representatives of financial bodies. Those representatives are generally content. I hope that the hon. Gentleman will be able to accept that as reassuring news.
Against the background of these complicated matters, he and I are both much dependent on the ability of expert advisers to grapple with the details. I believe that the result of these efforts is an improved Bill. We discussed at an earlier stage the principles that are involved and I know that they have found agreement with the hon. Gentleman.


I hope that he will be able to approve all the efforts that have been made to get in correct form the ensuing detailed arrangements.

Mr. Clinton Davis: I do not want to discuss the principles underlying the changes in the law which the Minister has enunciated and with which he dealt more specifically earlier in our considerations. However, I am deeply disturbed at the way in which the House is being asked to deal with what is admittedly complex legislation.
The Minister says that he is simplifying formulae and clarifying and simplifying the Bill. I suppose that everything has to be regarded relatively. If he thinks that at the end of the day we shall emerge with a simple formula, I cannot share his opinion, to put it at its most polite. If our considerations on Report were followed by considerations on super Report and by further considerations on super, super Report, I expect that more changes would be made as we went along.
I wish that I had the same confidence as the Minister has displayed. He has suggested that he has now found the magic formula. This is the Government's third attempt. I remind the Minister that he said in Committee on 30 June: 
In the light of the representations received, the Government have decided upon a radical revision of section 54 rather than the simple clarification which we sought initially. As regards private companies, we have tabled amendments in the spirit of the approach of the Jenkins committee, to permit a company to assist the acquisition of its own shares subject to proper safeguards for creditors and minority shareholders. This is the purpose of new clauses 11 and 12.
The Minister continued to talk about the consultations that had taken place. He commented on how everybody at that stage appeared to be satisfied. The same sort of representatives had been consulted then. The Minister provided the Committee with a powerful peroration. He said: 
We all realise the importance of the measures and I am grateful for the contributions made by hon. Members.
The Minister is unfailingly polite to all hon. Members. In fact, the contributions had been limited. If we had had a full-scale debate, the Minister's plaudits would have been more deserving. He was kind to us even when we were failing in our duties. He added: 
I believe that the Government's proposals meet the needs. They have, after all, followed the most tremendous and worthy efforts in consultations to get the proposals right and take account of good points. The proposals are now in an acceptable form, which I commend to the Committee."—[Official Report, Standing Committee A, 30 June 1981; c. 296–317.]
The Minister said the same today. What worries me is whether the Government can be right. Exactly the same people said that they were right before, and then they had second thoughts. It would be wrong for me to complain. I do not complain that people should have second thoughts in matters as complex as this one. However, I am not satisfied that the second thoughts are necessarily right in matters as complex as this.
I am sure that the way in which Parliament is permitted to scrutinise this form of legislative proposal is hopelessly and utterly inadequate. That proposition could not be more demonstrably true than in this instance. In effect, Parliament has been effectively cut out of the process of properly considering these proposals. We could not have considered the proposals which were laid before the Committee as they were laid at a late stage. The Minister will be the first to concede that. He generously conceded

it when we dealt with the matter in Committee. Now we know that, following those detailed consultations, the new proposals were laid on 8 October.
One of the most important features of proper scrutiny of legislation is that the Opposition and Government Back Benchers should be involved. Perhaps we have a contribution to make. However, the reality is that when professional bodies and other bodies such as those which have been involved in the consultation have been up to their eyes in trying to get the situation right with departmental officials, there is no time for that broader consultation to take place. That is grossly unsatisfactory.
I have made that plea in Committee and on the Floor of the House on a number of occasions. I thought it right to seize this opportunity because the example of the inadequacies of our procedures was so clear that I could make that complaint again. I cannot plead not guilty to the same charge. When in a Minister's position and undertaking complex legislation, and when relying heavily on professional expertise, one cannot avoid those concerned saying that they are dissatisfied with the proposals, although they had vetted them before, and that they are therefore now advancing a different proposition. One must listen favourably to them.

Mr. Nicholas Baker: Will the hon. Member accept that the commercial company world is changing fast—for example, in management buy-outs? That is happening on an increasing scale. I understand why the representations that were made recently about how section 54 might affect such transactions would be different from the representations that were made only six months ago.

Mr. Davis: I dare say that the hon. Member is right. That demonstrates more forcibly the inadequacies of procedures so antiquated that they cannot possibly deal with the challenges of legislative requirements which are imposed upon us. I do not believe that the Select Committee procedure that is currently employed is the right way to deal with this matter. We should employ the statutory instrument formula more readily. We discussed that formula yesterday. Although the statutory instrument cannot be amended in its present form, subsequently it can be changed much more easily.
If this proposal is all wrong and found to be totally impracticable, what shall we do? The poor Minister has to persuade his colleagues to give him more time. If the situation becomes demonstrably wrong, he must persuade his colleagues to give him more time for another Companies Bill to deal with that situation. What happens then? We have another major Companies Bill because he cannot stop that happening.
Therefore, we are living in an Alice-in-Wonderland world when dealing with company or patent legislation—anything that is complex, and most of which is non-contentious. The Minister should try to persuade his colleagues to see that in this area of the law we are able to deal with changing circumstances much more rapidly and effectively than our present formulae permit us to do. I think that I carry the few hon. Members in the House with me on that. 
6.45 pm
I only wish that the Minister's confidence in the present situation would be realised. I genuinely believe that change is necessary and that the Minister is trying to get this matter right. I wish to correct one possible


misunderstanding. I acquit his officials of any blame in this respect. I do not believe that it would be right to charge them with any lack of diligence. I know them well enough, although the individuals have changed since I was in the Department. That Department has always gone to great lengths to consult. The officials are not without criticism. No one is. However, they do their job with care and skill, particularly when one realises that most of them are not lawyers. They have to grapple with those horrendous problems with no legal background.
However, other Members of Parliament need to be involved in the process. Coupled with the suggestions which I have made previously, there is no reason in the world why interested Members from all parties with an interest in a technical subject in which political overtones are not involved should not be called in by the Minister and told at an early stage that their co-operation is desired. I believe that this Minister would welcome that approach, but perhaps the mores to which we are accustomed will not permit him to do that. We must break down those reserves. That is never truer than in this range of company legislation.
In the Bill we will come across more and more second, third and even fourth thoughts. I am prepared to understand why that happens. The Minister is right to think again about propositions which have been shown by those who are expert to be likely to founder. Of course, he is right to be flexible. That is being realistic. However, I hope that he will think again about the procedural follies in which we are engaged. They are almost pantomimes when we consider such Bills when, because we are given such short notice to consider the matters in detail, we are caught out of our depth. That is wholly wrong. However, having said that, I do not object to the propositions which the Minister has put forward.

Mr. Neville Trotter: The hon. Member for Hackney, Central (Mr. Davis) made some interesting points in his philosophising about the way in which the House considers a Bill of this magnitude and complexity. I suppose that it is because of the lack of briefings that so many hon. Members are absent tonight. One might have thought that there would be general interest in such a Bill. Obviously, there is not. Perhaps it is significant that it is being debated in the week of an important by-election. No doubt many hon. Members are in Croydon tonight.
One wonders whether the time scale of the annual parliamentary procedure is appropriate for a Bill of this nature and magnitude. There must always be the problem of a Bill failing completely if it does not complete its passage through the House within a year. Does a Bill of such a technical nature really need to be subjected to the usual cut-off procedure at the end of the parliamentary Session? Could it not be allowed to go on into the next Session? There would then be more time at each stage for the necessary consultation.
I cannot help reflecting on whether it is necessary in this modern age to have the detailed discussion of every technical amendment on the Floor of the House in this way, and whether it might not be better to have amendments tabled, with the right of hon. Members to select those that they wish to debate. It puts a very heavy burden on the Minister to have to go through every one of the technical amendments in detail when obviously most of them are not controversial. 

I was involved in one discussion on amendments in Committee. It was, in fact, a colleague in my own firm—a man of great eminence in his field—who pointed out that the wording that had been incorporated initially would produce some practical and serious problems that could prevent the clause from having the desired effect. The amendments before the House tonight will, I think, deal satisfactorily with his objection. But in general the concept of supporting and enabling management buy-outs is one on which the Government are to be congratulated. Finance for Industry Limited was very concerned that company and tax law are making it almost impossible for management buy-outs—which would save companies and provide a secure future for them—to take place.
There were two prongs of attack on the problem. In so far as one was involved in trying to obtain amendments at the Treasury end of the Government, one met with no success whatever. There were tax situations on which liabilities arose that were in no way reflecting real events. They were completely artificial tax liabilities that were arising in the attempts that were being made to get round the existing company law that prevented management buyouts. I know that Finance for Industry Limited was as pleased as I was that my hon. Friend was able to solve this problem by means of the clause that we are debating tonight. I should like to record my appreciation, and that of my profession, for the ready way in which he has enabled this problem to be overcome. It is one of the most beneficial clauses in the whole of the Bill.

Mr. Eyre: I have a good deal of sympathy with the views expressed by the hon. Member for Hackney Central (Mr. Davis) on the need for the involvement of Back Benchers, both Government and Opposition, in the preparation of legislation. The hon. Gentleman knows—and was kind enough to say in his speech—that there are specially difficult factors in this area of company law, and that those difficulties, in the case that we are now discussing, have been greatly intensified by limitations of time. They have also been made more difficult by virtue of the fact that the House has been in recess while much of the slogging work has had to be done and the refinements developed.
The hon. Gentleman will have noted that the amendments in question were tabled on 8 October, but we both understand that at about that time of year there are other demands upon the time of hon. Members who are involved in these complicated matters. Within all this complexity, I accept that more time would have been most desirable, but I much appreciate the hon. Gentleman's entirely justified tribute to the efforts of officials in my Department. Like myself, they have been doing everything they can, under pressure, to get this legislation as right as possible.
I should also like to express my appreciation to my hon. Friend the Member for Tynemouth (Mr. Trotter) for his kind remarks. He emphasised the need for the great expertise that has to be developed in so many areas of the subject for a person to be able to offer an informed opinion on a current problem or to get anywhere near solving it. We all appreciate that and are humiliated by the complexity of the considerations involved.
My hon. Friend the Member for Dorset, North (Mr. Baker), in an intervention, made an important practical point when he emphasised the rapidity with which change


takes place in commercial law. The pressure that then develops for something to be done in the legislative field is enormous and difficult to resist.
Taking account of all these factors, I shall bear very much in mind the procedural points made by the hon. Member for Hackney, Central, and I am grateful to him for the way in which he has accepted the amendments.
Amendment agreed to.
Amendment made: No. 19, in page 46, line 1, leave out 'Subsection (1)' and insert 'Subsections (1) and (1A)'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 20, in page 46, line 3, leave out 'paid or' and insert 'made or any distribution'.
The purpose of the amendment is to clarify the drafting of paragraph (a) of subsection (3) of clause 40.
Amendment agreed to.
Amendments made: No. 21, in page 46, line 20, leave out 'Subsection (1)' and insert 'Subsections (1) and (1A)'.
No. 22, in page 46, line 25, after 'scheme', insert

'within the meaning of section 87(1) of the 1980 Act)'.

No. 23, in page 46, line 34, leave out 'company's net assets' and insert

'company has net assets which'.

No. 24, in page 46, leave out from beginning of line 39 to end of line 5 on page 47 and insert—

'financial assistance given by way of gift;
financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver;

(ba) financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of any other party to the agreement remains unfulfilled or by way of the novation of or the assignment of any rights arising under any loan or such other agreement; or'.

No. 25, in page 47, line 6, leave out from 'company' to end of line 7 and insert

'the net assets of which are thereby reduced to a material extent or which has no net assets.

In this subsection "net assets" has the same meaning as it has for the purposes of the 1980 Act.'.

No. 26, in page 47, line 7, at end insert—

'Any reference in this section to a person incurring any liability shall be read as including a reference to his changing his financial position by making any agreement or arrangement (whether enforceable or unenforceable and whether made on his own account or with any other person) or by any other means.
Any reference in this section to a company giving financial assistance for the purpose of reducing or discharging any liability incurred by any person for the purpose of the acquisition of any shares shall be read as including a reference to the company giving financial assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.'.

No. 27, in page 47, leave out lines 8 to 10 and insert—

'(7) For the purposes of subsection (5) above—

"net assets", in relation to the giving of financial assistance by any company, means the amount by which the aggregate amount of the company's assets exceeds the aggregate amount of its liabilities taking the amount of both assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given; and
"liabilities" includes any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise;'.—[Mr. Eyre.]

Clause 41

RELAXATION OF SECTION 40 RESTRICTIONS FOR PRIVATE COMPANIES

Amendments made: No. 28, in page 47, line 20, after '(1)', insert 'and (1A)'.

No. 29, in page 47, line 21, leave out 'for the' and insert

'in any case where the acquisition of shares in question is or was an'.

No. 30, in page 47, line 27, leave out 'company's net assets' and insert

'company has net assets which'.

No. 31, in page 47, line 32, leave out 'for the' and insert

'in any case where the acquisition of shares in question is or was an'.

No. 32, in page 47, line 40, leave out 'for the' and insert

'in any case where the acquisition of shares in question is or was an'.— [Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 33, in page 48, line 12, leave out from 'contain' to first 'of' in line 13 and insert

'such particulars of the assistance to be given and'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 34.

Mr. Eyre: Amendment No. 33 permits the particulars of financial assistance that a private company plans to give under clause 41, and which must be stated in the statutory declaration made by the directors, to be prescribed by the Secretary of State.
Amendment No. 34 adds an alternative basis for the directors' statutory declaration, that the company will remain able to pay its debts for a year after financial assistance for the purpose of acquisition of its shares is given. Their declaration will still have to be based on the present requirement in subsection (7)(b)(i) of clause 41 as to the company being able to pay its debts immediately after the assistance is given.
The new provision is intended to provide an alternative to the present requirement concerning solvency over the following year.
Amendment agreed to.
Amendments made: No. 34, in page 48, line 22, leave out from 'debts' to end of line 27 and insert

'and either—

() if it is intended to commence the winding up of the company within twelve months of that date, that the company will be able to pay its debts in full within twelve months of the commencement of the winding up; or

() in any other case, that the company will be able to pay its debts as they fall due during the year immediately following that date.'.

No. 35, in page 48, line 43, leave out

'for the acquisition of any shares'.—[Mr. Eyre.]

Mr. Eyre: Mr. Eyre: I beg to move amendment No. 36, in page 49, line 6, leave out 'each such resolution' and insert

'that resolution (or, if more than one, each of them)'.

The amendment provides a justifiable exception to the requirement that a period of four weeks shall elapse between the passing of a resolution and the giving of assistance under the clauses that we have been discussing.

Amendment agreed to

Mr. Eyre: Mr. Eyre: I beg to move amendment No. 37, in page 49, line 14, leave out 'seven' and insert 'eight'.

The amendment increases the maximum length of time, after the directors have made their statutory declaration, during which the company can give the financial assistance, from seven weeks to eight weeks.

Mr. Clinton Davis: Will the Minister explain briefly why that period has been extended?

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Mr. Eyre: I am glad to do so. The amendment is put forward following comments that various representative bodies have made about the short amount of time allowed by these provisions for a company to complete a transaction involving the giving of financial assistance. There is a need to ensure that the statutory declaration by the directors is as recent as possible at the time when assistance is given, as this is often an important safeguard for creditors. However, the Government consider it reasonable to allow a little more time by this amendment, increasing the present seven-week period for the statutory declaration to eight weeks. This will allow the same maximum as those provisions permitting a company to purchase its own shares out of capital. The company will thus have a maximum of three weeks in which to give the financial assistance, because one week is allowed after the declaration for the assistance to be authorised by the company and a further four weeks must elapse before any payment can be made, to allow time for any application to the court for cancellation of the authority. The hon. Gentleman will realise that that makes eight weeks.

Mr. Clinton Davis: I think that this is a useful proposal The standardisation of the procedure is also helpful as it tends to the avoidance of doubt and difficulty about the time scale for many of these matters. I therefore support the proposal.
Amendment agreed to.

Clause 42

PROVISIONS SUPPLEMENTARY TO SECTION 41

Mr. Eyre: I beg to move amendment No. 38, in page 49, line 26, leave out within the week immediately following' and insert 'on'.

Mr. Deputy Speaker (Mr. Bernard Weatherill): With this it will be convenient to take Government amendment No. 39.

Mr. Eyre: These amendments make clear that the special resolution authorising the giving of financial assistance may be passed on the same day as the directors make the statutory declaration or within the week immediately following that day.
Amendment agreed to.
Amendment made: No. 39, in page 49, line 29, at end add

'or within the week immediately following that date.'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 40, in page 50, line 19, after 'is', insert 'required to be'.
This amendment changes subsection (5)(b) of clause 42 to make it clear that it applies only where no special resolution authorising financial assistance is required to be passed because the company is a wholly owned subsidiary.
Amendment agreed to.

Amendment made: No. 41, in page 50, leave out lines 36 to 38 and insert—

'(8) In section 41 of this Act, "financial assistance" and "net assets" have the meaning given by subsections (6) and (7) of section 40 of this Act respectively.'.—[Mr. Eyre.]

Clause 43

POWER OF COMPANY TO ISSUE REDEEMABLE SHARES

Mr. Eyre: I beg to move amendment No. 42, in page 50, line 43, leave out from 'are' to end of line 44 and insert
'to be redeemed or are liable to be redeemed at the option of the company or the shareholder'.
This amendment makes express provision for a company to issue shares that are redeemable at the option of either the shareholder or the company.
Amendment agreed to.

Mr. Eyre: Mr. Eyre: I beg to move amendment No. 43, in page 51, line 8, leave out 'section 50' and insert

'sections 50 and 55(4)'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 54 to 56.

Mr. Eyre: In the hope that I shall be able to assist the House, I shall endeavour to summarise the effect of the amendments.
The amendments Swill change the remedies that are to be available against the company where the company has failed to purchase or redeem shares. At present clause 55 provides that any general remedy that would normally be available for a breach of contract will be available against the company for failure to purchase or redeem but that in a winding-up the claim of a shareholder in respect of such failure is to be postponed to all other debts and liabilities of the company but is to have priority over the rights of other shareholders in a winding-up. Clause 55 as amended will provide, first, that a company shall not be liable to pay damages in respect of a failure to purchase or redeem but that other remedies are to be available; secondly, that where a shareholder brings an action in court for specific performance of the contract of purchase or terms of redemption no order is to be made if the company shows that it could not pay the price out of distributable profits; and thirdly, that in a winding-up the shareholder may enforce the terms of the contract or the terms for redemption provided that the due date for purchase or redemption was before the date of the commencement of the winding-up.
I believe that that deals with the essence of the amendments.
Amendment agreed to.

Clause 46

CONTINGENT PURCHASE CONTRACTS

Amendments made: No. 44, in page 55, leave out line 6.

No. 45, in page 55, line 15, leave out subsection (4).—[Mr. Eyre.]

Clause 48

DISCLOSURE OF PARTICULARS OF PURCHASES AND AUTHORISED CONTRACTS.

Mr. Eyre: I beg to move amendment No. 46, in page 56, line 25, leave out 'transferred' and insert 'delivered'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 47 to 49.

Mr. Eyre: These amendments replace references to shares being "transferred" to the company with references to their being "delivered" to the company or purchased by it. This is to remove any implication that a stampable instrument of transfer is necessary to effect a purchase of own shares and that stamp duty is payable.

Mr. Clinton Davis: I am glad that the Minister has seen fit to do this. I think that the Law Society made the initial representations, which we reiterated in Committee. I think that this is a sensible series of amendments.

Amendment agreed to.

Amendments made: No. 47, in page 56, line 29, leave out 'transferred' and insert 'delivered'.

No. 48, in page 56, line 37, leave out 'transferred' and insert 'delivered to the company'.

No. 49, in page 57, line 8, leave out

'transfer of all shares purchased'

and insert

'purchase of all the shares'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 50, in page 57, leave out lines 17 to 20 and insert

'without charge—

of any member of the company; and
if the company is a public company, of any other person.'.

Mr. Deputy Speaker: Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 84.

Amendment No. 190, in clause 75, page 88, line 37, after 'prescribe' insert

'which shall not exceed £5,',

Government amendment No. 85,

Amendment No. 191, in clause 75, page 88, line 40, after 'prescribe' insert

'which shall not exceed £5,',

and Government amendment No. 86.

Mr. Eyre: These amendments prevent a company from charging for inspection of certain documents, whether by members of the company or by non-members, and specify the maximum fee which a company can charge for providing copies of the documents.

Mr. Clinton Davis: I am very glad that the Government have reacted in the way in which they have on this matter. The Minister will recall that we were somewhat concerned about the situation. I think that he has met our proposals perfectly reasonably and that he has devised a solution to the difficulties to which we referred in Committee that is preferable to our own amendment No. 190.
He will recall that the reason for our concern about the situation was that companies could easily be the sole arbiters of what the charge ought to be. I believe that it was prescribed that the company should make only a reasonable charge but the word "reasonable" can mean almost anything. We were concerned that a company that did not wish to provide the information might impose a

charge that one could not realistically challenge even though it was unreasonable. It was therefore necessary to define more specifically what the company could charge.
I believe that what the Government now propose is very satisfactory indeed. It is possible that a company may not find the charge wholly acceptable, because it may find itself a little out of pocket. However, I believe that companies have a duty to the public as a whole and that the point is met by the Minister's recognition of that fact.
I therefore warmly support the Government's proposals.
Amendment agreed to.

Clause 50

POWER OF PRIVATE COMPANIES TO REDEEM OR PURCHASE OWN SHARES OUT OF CAPITAL

Amendment made: No. 51, in page 58, line 43 leave out from 'the' to end of line 44 and insert—

'price of redemption or purchase'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 179, in page 59, leave out lines 31 to 46 and insert—

The reference in subsection (2)(a) above to available profits of the company is a reference to the company's profits which are available for distribution (within the meaning of Part III of the 1980 Act), but the question whether a company has any profits so available and the amount of any such profits shall be determined for the purposes of this section in accordance with the following provisions of this section instead of in accordance with section 43 of the 1980 Act.
Subject to subsection (9) below, that question shall be determined by reference to the relevant items (within the meaning of section 43 of the 1980 Act) as stated in the relevant accounts for determining the permissible capital payment for any shares under this section; and those accounts are such accounts, prepared as at any date within the period for determining the amount of that payment, as are necessary to enable a reasonable judgment to be made as to the amounts of any of those items.
For the purposes of determining the amount of the permissible capital payment for any shares under this section, the amount of the company's available profits (if any) determined in accordance with subsection (8) above shall be treated as reduced by the amount of any distributions lawfully made by the company after the date of the relevant accounts and before the end of the period for determining the amount of that payment.
The reference above in this subsection to distributions lawfully made by the company shall be read as including any financial assistance given by the company as mentioned in subsection (1)(a) or (b) of section (Supplementary provisions relating to Part III of the 1980 Act) of this Act and any payment of a description within subsection (1)(d) or (e) of that section lawfully made by the company.

References in this section to the period for determining the amount of the permissible capital payment for any shares are references to the period of three months ending with the date on which the statutory declaration of the directors purporting to specify the amount of that payment is made in accordance with section 51(3) of this Act.'

Mr. Deputy Speaker: With this we may take Government amendments Nos. 155 and 156.

Mr. Eyre: These amendments replace subsections (7) and (8) of clause 50 with provisions that are much clearer and easier to understand. The existing provisions, and those which replace them, provide a method for determining the amount, if any, of a company's distributable profits as these must be used in a purchase or redemption of its own shares before it may draw upon capital reserves. The amendment makes only one change of policy of any significance. It requires the accounts by reference to which available profits are determined to be


such as to enable a reasonable—rather than a proper, as at present—judgment of the amount to be made. This imposes a less rigorous but reasonable standard by which the matter can be judged.
Amendment agreed to.

Clause 51

REQUIREMENTS FOR REDEMPTION OR PURCHASE OUT OF CAPITAL: SPECIAL RESOLUTION APPROVING PAYMENT

Mr. Eyre: I beg to move amendment No. 53, in page 61, line 5, at end insert 'on or'.
This amendment to clause 51(6) permits the special resolution authorising a payment out of capital for a purchase or redemption of own shares to be made on the same day as the making of the directors' statutory declaration, while retaining the existing requirement that it may also be made within one week immediately following the date of the declaration.
Amendment agreed to.

Clause 55

EFFECT OF COMPANY'S FAILURE TO REDEEM OR PURCHASE OWN SHARES

Amendments made: No. 54, in page 65, leave out from beginning of line 25 to end of line 16 on page 66 and insert—

Where on or after the appointed day a company—

issues shares on terms that they are or are liable to be redeemed; or
agrees to purchase any of its own shares; the following provisions of this section shall apply in relation thereto.

A company shall not be liable in damages in respect of any failure on its part to redeem or purchase any of the shares.
Subsection (2) above is without prejudice to any right of the holder of any of the shares other than his right to sue the company for damages in respect of its failure; but the court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the cost of redeeming or purchasing the shares in question out of distributable profits.
Where the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased then subject to the following provisions of this section the terms of redemption or purchase may be enforced against the company; and when shares are redeemed or purchased under this subsection they shall be treated as cancelled.
Subsection (4) above shall not apply if—

the terms of redemption or purchase provided for the redemption or purchase to take place at a date later than the date of the commencement of the winding up; or
during the period beginning with the date on which the redemption or purchase was to have taken place and ending with the commencement of the winding up the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.
There shall be paid in priority to any amount which the company is liable by virtue of subsection (4) above to pay in respect of any shares—


all other debts and liabilities of the company (other than any due to members in their character as such);
if other shares carry rights whether as to capital or as to income which are preferred to the rights as to capital attaching to the first mentioned shares, any amount due in satisfaction of those preferred rights; but, subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.'.

No. 55, in page 66, line 23, leave out '(5)' and insert '(6)'.

No. 56, in page 66, leave out lines 24 and 25.—[Mr. Eyre.]

Clause 56

RESTRICTION ON COMPANY'S POWERS TO REQUIRE MEMBERS TO SELL BACK SHARES

Mr. Eyre: I beg to move amendment No. 57, in page 66, line 26, leave out clause 56.
This amendment amends the definition of distributable profits provided in clause 57 for the purpose of part III of the Bill, and provides an additional definition of distribution—

Mr. Clinton Davis: Are we on amendment No. 57?

Mr. Eyre: Yes. The amendment has the effect of ensuring that all the provisions of part III of the 1980 Act, which determines the legality of a distribution, apply to any payment in connection with the purchase or redemption of own shares or any financial assistance which is required by the Bill to be paid out of distributable profits.

Mr. Clinton Davis: I am sorry for interrupting. Perhaps I am mistaken, but amendment No. 57 seeks to leave out clause 56 and so far I do not think that the Minister has addressed himself to that point.

Mr. Eyre: I apologise to the hon. Gentleman. My hon. and learned Friend the Minister for Trade was to deal with the precise terms of the amendment that the hon. Gentleman has in mind, but it may be for the convenience of the House if I turn to the argument that my hon. and learned Friend would have developed. 
7.15 pm
The amendment that the hon. Gentleman has in mind proposes the deletion of clause 56. The clause prevents any company, with power to alter its memorandum or articles so as to require the transfer of a share to the company or any other person, from exercising such a power in relation to any share allotted before such an alteration is made, subject to two exceptions. First, a company may exercise such a power with the consent of the Secretary of State. Secondly, a company is permitted to take a power of pre-emption requiring a member proposing to transfer shares to offer them first to the company or another member on the same or more favourable terms as those of the proposed transfer.
The clause has been the subject of continuing consultations with outside bodies, both on the need for it in principle and on the difficulties of drafting satisfactorily an exception for powers or pre-emption while preserving the basic safeguard for shareholders against compulsory purchase of shares that the clause is intended to provide. In the light of the further representations received since Committee stage, the Government have concluded that on balance the clause should best be deleted.

Mr. Clinton Davis: I do not blame the Minister for speaking to the wrong amendment. I always find Amendment Papers extremely confusing. One must look all over the place for the amendment and the consequential amendments that are being discussed. While talking about


changes in our procedures, perhaps we should consider doing something about the way in which amendments are printed.
The hon. Gentleman has said that representations have been made to him to delete the clause. Perhaps he will be more specific as to what motivated those who made this challenge to clause 56. What sort of representations were made and where did they come from?

Mr. Eyre: I want to be as helpful as I can. It may assist the hon. Gentleman to know that our original purpose in introducing this provision was to safeguard holders of shares issued on terms which did not envisage the possibility of compulsory sale to the company. We thought this a valuable complement to the power of a company to purchase its own shares. A company may already take powers by amendment to its articles to compel a sale to another person, and the existing case law indicates that the exercise of such a power will be upheld by the court if it is in good faith, in the interests of the company as a whole.
The availability to companies of a power to purchase their own shares seemed to us to give rise to the likelihood of similar powers being taken to compel sale to the company. Where someone was willing to purchase shares issued on such terms we saw no reason to prevent it, but we thought objectionable the imposition of such a power by a majority on a minority shareholding that had not been applied on such terms. We therefore sought to prohibit alteration of rights attaching to shares so as to compel sale to the company.
It was illogical to prohibit only a transfer to the company, and the clause as drafted also prohibits an amendment to rights that would require transfer to any other person. It was, however, apparent to us that the clause should allow for an exception for cases in which the alteration of rights was in the national interest. Subsection (1) provides for this in permitting alteration with the consent of the Secretary of State. It was also clear that it was desirable for us to exempt a right of pre-emption exercisable by the company or any other person when a shareholder was proposing to transfer his shares, so long as the effect was not to make the shareholder incur some disadvantage as compared with his proposed sale. Subsection (2) attempted to provide for this.
We have identified a number of defects in the clause. However, the extensive consideration that the clause has received, both within the Department and outside it, has failed to suggest a satisfactory way of defining the circumstances in which a pre-emption right should be permitted and which would strike a proper balance between the legitimate rights of the company and the shareholder. Those words go to the root of the difficulty.
The choice is, therefore, between enacting the basic prohibition or deleting it. The balance of opinion among those whom we have consulted is strongly in favour of deletion. The Law Society of England and Wales, for example, has expressed itself strongly in favour of deletion and the Government have been persuaded that this is the right course. A shareholder who is aggrieved by the rights attaching to his shares will be able to have recourse to the courts to protect his interest under section 75 of the 1980 Act, which specifically provides for a member of a company to seek relief from any proposed act done by the

company on the basis of unfair prejudice or under common law, on the ground that it was not bona fide in the interests of the company as a whole.
I hope, as a result of that information, that the hon. Gentleman will now be better able to understand the difficulties. I believe that the consultation with the Law Society is persuasive as to why the difficult decision to delete the clause was made by the Government.

Mr. Clinton Davis: The knight in armour—less than shining armour—has arrived a little late, but we are glad to see the Minister for Trade, and I think that I speak for hon. Members on both sides of the House.
This experience shows how valuable consultation is. However, the Minister will also recognise that I was left uncertain as to why this was happening. I am grateful to him for expressing so clearly the reasons why the Government felt impelled to make the change.
Perhaps the Minister might be encouraged to use his red pencil a little more liberally on the rest of the Bill. I say that as one who might be asked to advise upon it from time to time. No doubt when he ceases to be a Minister he will be in the same position and he will then have viewed his failure to use the red pencil with concern. However, I am grateful to him for his explanation and I believe that his conclusion is right.
Amendment agreed to.

Clause 57

INTERPRETATION OF PART III, REPEAL OF SECTION 58 OF THE 1948 ACT AND SAVINGS

The Minister for Trade (Mr. Peter Rees): The Minister for Trade (Mr. Peter Rees): I beg to move amendment No. 180, in page 67, line 6, leave out from 'to' to end of line 9 and insert
'the making of any payment or the giving of any financial assistance (within the meaning of section 40(6) of this Act) by any company means those profits of which it could lawfully make a distribution equal in value to that payment or assistance, including in any case where the financial assistance is or includes a non-cash asset (within the meaning of section 87 of the 1980 Act) any profit which, if the company were to make a distribution of that asset, would by virtue of section 43A of the 1980 Act (distributions in kind) be available for that distribution; "distribution" has the meaning given by section 45(2) of the 1980 Act; and'.

This is a technical amendment that changes the definition of distributable profits in clause 57 to ensure that all the provisions of part III of the Companies Act 1980, which determine the legality of a distribution, apply to any permit in respect of a purchase or redemption of a company's owned shares or any financial assistance that is required by the Bill to be made out of distributable profits. It also provides a definition of distribution, which is a term used in new clause 37.

Amendment agreed to.

Amendment made: No. 58, in page 67, line 28, leave out subsection (4).—[Mr. Peter Rees.]

Clause 58

OBLIGATION TO NOTIFY KNOWN INTERESTS IN VOTING SHARES IN A PUBLIC COMPANY

Mr. Peter Rees: I beg to move amendment No. 59, in page 70, line 16, at end insert

'; and it is hereby declared for the avoidance of doubt that the temporary suspension of voting rights in respect of shares


comprised in issued share capital of a public company of any such class does not affect the application of this Part of this Act in relation to interests in those or any other shares comprised in that class'.

Mr. Deputy Speaker: With this, we may take Government amendment No. 87.

Mr. Rees: The amendment is designed to cover a drafting point made by the Law Society, which I believe was foreshadowed, with his usual perception, by the hon. Member for Hackney, Central (Mr. Davis) in Committee. Clause 58(10) defines relevant share capital for the purposes of part IV of the Bill as share capital
carrying rights to vote in all circumstances at general meetings of the company.
The hon. Gentleman and the Law Society pointed out that there might be cases where the voting rights were suspended temporarily. One example is where a direction has been issued by the Secretary of State under section 174 of the 1948 Act. It is to meet that point, which is obviously a point of substance, that we have put down this amendment and amendment No. 87.

Mr. Nicholas Baker: I support the amendment, but it has been suggested to me that the welcome clarification made still produces a clause that is extremely complex and unlikely to be easily understood by company secretaries whose job it will be to examine the disclosure provision.
Will my hon. and learned Friend consider issuing a consultative document to explain the disclosure provisions, on the lines that he has done frequently in tax legislation? That would be a great help.

Mr. Rees: I know of the close practical attention that my hon. Friend pays to these matters and I should like to respond to his point. I am not sure that a consultative document is entirely the right way, but I shall take the problem away and see how we can publicise the views of the Department. There is, or should be, a certain diffidence by Ministries in publishing these explanatory documents. As my hon. Friend and the House will readily know, such documents do not have the force of law in the courts, which are the final arbiters on these matters once they have passed out of the care of Houses of Parliament and Her Majesty. The mere view of the Department as to what the legislation might be thought to mean is not decisive.
However, having given what might be thought to be a pedantic constitutional lawyer's point, I hope that in practical terms I have given some reassurance to people who have to construe these matters, because this is the way in which the provisions might have to be applied in practice in extremity. I shall take away the point and see how far we can offer an expanded layman's view of how the disclosure provisions operate. Subject to that, I commend the amendments to the House.

Mr. Clinton Davis: I am a little perturbed by what the Minister has just said. I should like the Department of Trade to have a blind shot at what it believes some of these provisions might mean. It might be better than humble solicitors such as the hon. Member for Dorset, North (Mr. Baker) and myself having a blind shot at it. Perhaps the Department's blind shot and our blind shot might combine to give the right view. I urge the Minister not to dismiss the matter quite so lightly simply on the basis of tradition, and perhaps to think a little more about the proposition that was advanced. Thai would be helpful. 

I do not believe that the courts would feel that they were impelled to consider an explanatory memorandum that was issued by a Government Department. It might be hopelessly wrong. It would not be the first time that the Department of Trade was wrong. After all, the purpose of this legislation is to help the business man and the professional adviser to arrive at the right construction of the law. The more help that they can get, the better. The Minister may say that they could be misled, but the help that professional advisers can get by considering another point of view is always desirable. It could still mean that they would come to a different conclusion in advising their clients. I hope that the hon. and learned Gentleman will reconsider what he said.
Amendment agreed to.

Clause 59

THE PRESCRIBED PERCENTAGE

Mr. Peter Rees: I beg to move amendment No. 60, in page 70, line 34, leave out 'fourteen' and insert 'ten'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 68, 80, 88, 89, 148 and 149.

Mr. Rees: The amendments relate to certain of the time periods laid down for fulfilment of obligations imposed by the Bill. I believe that the point was in part stressed by the Opposition in Committee. It is thought more appropriate to have shorter periods for the discharge by companies of their obligations under the Bill.

Mr. Anthony Nelson: I am interested in the reasoning behind the amendment to reduce the time period from 14 to 10 days. It is proper that there should be an obligation for people who acquire interests in companies at or above the relevant amount to do so within the five days set out in clause 58(6). In clause 59 it is proposed that, where the Secretary of State makes a regulation that has the effect of reducing the percentage and thus bringing within the category a number of people who have shareholdings in excess of that amount, they will have an obligation to declare their interests, albeit that the interest was acquired previously and did not have to be notified.
I suppose that the reduction from 14 tp 10 days is reasonable, but on the face of it it seems a little arbitrary. It is only a minor point, but what led the Government to make the change?
Under clause 59 the Secretary of State can by regulation made by statutory instrument from time to time prescribe different percentages in the case of companies of different classes or descriptions. What criteria may be applied in deciding what companies or categories of company will have various percentages applying to them?
In the past I have been critical of the extent to which shareholdings can be built up covertly or even openly in major companies or sensitive or strategic industries. In companies that have interests of national importance or where, for example, a considerable number of employees are involved, it is proper to ensure that the shareholding built up by an investor either from within or outside the country is at a level that requires notification and publication at an early stage. 


I fear that the regulations in clause 59 may not be used sufficiently stringently. I seek an assurance that Ministers will consider from time to time using the important provisions to ensure that major, strategic and large employing companies are protected from potential predators by the insistance that, if shareholdings are built up to a fairly small percentage, in certain instances it will be necessary for them to be notified publicly.

Mr. Peter Rees: I did not have the privilege of serving on the Standing Committee, but I have taken the pleasurable precaution of reading the debates and I noticed the powerful contribution of my hon. Friend the Member for Chichester (Mr. Nelson) on the question of concert parties.
I feel that it would be wrong for any Administration to tie themselves too closely to the kind of situation in which the Secretary of State might feel disposed to introduce this kind of regulation. It will, after all, be open to challenge and debate in the House. As my hon. Friend knows, we are in a highly fluid and fast-moving situation where the Secretary of State must balance many considerations before weighing into the matter. To tie himself in advance to a statement on the kind of criteria that he wishes to apply might be rash. However, I shall take away my hon. Friend's point to see whether it might be prudent and helpful to evolve some useful guidelines.
There is no disposition in this Government or, I am sure, the previous one to spring a change on the market. One likes these matters to be pondered carefully in advance. One would also like to feel that certain principles could be distilled, but I am a little hesitant to tie the hands of any Secretary of State. Although the guidelines would not have the force of law, once published they would have a certain sanctity.
My hon. Friend rightly challenged whether there was a deep underlying rationale for reducing 14 to 10 in four or more cases and 21 to five in amendment No. 80. The answer is "No". One has to try to balance various factors. After the informed debates in Committee, it was felt that the period should be shortened, and I am happy to concede that the precise number of days, weeks or years was slightly arbitrary. It is better to be candid. No doubt an equally good intellectual case could be made for 11 days or nine. These are practical matters.
Although I do not wish to hold out the awful prospect of another Companies Bill within a measurable space of time, these matters are subject to review. If the House feels we have it badly wrong, sometime—not perhaps in the lifetime of this Parliament—we could come back to it. However, I believe that a fair balance has been struck, and I hope that the amendments will commend themselves to the House.
Amendment agreed to.

Clause 62

NOTIFICATION OF GROUP INTERESTS OF PERSONS ACTING TOGETHER.

Mr. Peter Rees: I beg to move amendment No. 61, in page 72, line 20, leave out 'subsection (10) below' and insert

'the following provisions of this section'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 62, 63 and 64.

Mr. Rees: The amendments all relate to the same point.
When clause 62 was reviewed after the close debates in Committee, the Government came to the conclusion that the use of the words "or arrangement" in subsection (2) was superfluous and, indeed, might introduce an element of ambiguity. "Arrangement" is defined in various ways in other parts of the Bill, and it was thought that this might indicate that there was another form of arrangement not within the definition. It was thought that this would make for greater clarity. On that basis, I can commend the amendments to the House.

Mr. Nelson: This set of amendments takes us to the heart of the provisions of the Bill which attempt to deal with concert parties. I should like to use this opportunity to raise a number of points directly relevant to the amendments and perhaps to probe more than I did on the previous set of amendments. I am worried particularly that the amendments now under discussion, which admittedly result from a full debate and discussion in Committee, appear to introduce rather more restrictive or legal terms on the sort of agreements that will be notifiable.
I shall try to explain this more simply. We are trying to prevent groups of people acting together, either formally or informally, but with the definite understanding that they will all benefit from such co-ordination, to acquire shareholdings in companies that are above the level that has to be notified publicly and that may subsequently be injurious to other shareholders or employees in those companies. It is a matter of some significance. It is proper for us to ensure that the terms of this legislation are cast sufficiently wide to become an adequate deterrent to those who will seek by informal means to evade the responsibilities that these provisions would otherwise imply.
What really concerns me is the matter I raised on Second Reading. We are concerned not only with people in this country who may play by the rules and who may play the game. We are increasingly concerned with interests and individuals abroad who are looking more actively to companies in this country and acquiring substantial stakes almost day by day in household name companies. They are not subject to the jurisdiction of British law. There is nothing even in this Bill—sadly, in my judgment—which will take away the rights of any investment that they make in these companies. I have to admit that even if we are to cast this legislation tighter in preventing such activities, we would not wholly prevent the possibility of them arising. The difficulties that certain major British public companies have experienced even investigating who has built up a shareholding in them, let alone whether that investor has acted in concert with another party, demonstrate the real problems faced by companies in pursuing investigations outside this country. They also demonstrate the improbability that those individuals, companies, nominees and agents outside this country will necessarily observe British law in this respect.
Nevertheless, we must do our best to ensure that our legislation is cast sufficiently wide and that it is sufficiently specific to ensure that such activities are deterred so far as possible. I have referred at length on previous occasions to the case of Consolidated Gold Fields


where a dawn raid was preceded by the building up of a covert purchase of a substantial interest in the company by a number of foreign and domestic corporations acting in concert. Since that time and, indeed, since this Bill was introduced or discussed in Committee, there have been further examples of companies in this country that have been acquired suddenly early in the morning by predator companies acting from within or without our shores.
I recognise that dawn raids on companies in which there is an open market operation and where shares are acquired quickly and suddenly and in substantial numbers are different from the building up of a share interest in the company and where there is a requirement, as laid down in this legislation, for an interest to be notified. But these two activities often go together. Companies or individuals will build up an interest and sometimes, if they can, sadly, they will do so covertly. They will go into the market early one morning to bring their interest well above that which has to be notified and at a price that is much lower than would perhaps have been the case if they had made a general offer to all shareholders. In so doing, they act very much to the detriment of other shareholders who do not necessarily have the opportunity to subscribe to shares at the same price. 
7.45 pm
Since the matter was discussed in Committee, a number of companies have been subject to this sort of activity. It was interesting to see that one major Malaysian company—I think that it was called Permodalan—took a major interest in the Guthrie Corporation here. Subsequently and, in fact, I believe only today, that same Malaysian company is bidding against Preussag for its shareholding in the Amalgamated Metals Corporation. The significance of these two events is that a major corporation, in this case in Malaysia, has sought to repatriate or re-buy the interests in certain national holdings in tin mines, smelting and other interests. We find increasingly that the nationalism in other countries, combined with the prodigious sums of money available to international investors, has made them look much more acquisitively at opportunities offered by the free market available in the City of London. On the other hand, if we look at what is happening in our own market, we see that the low level of share prices at present, combined with the relatively low exchange rate, makes it doubly attractive for foreigners to come and examine the possibility of acquiring shares in British companies.
I do not believe, that there is necessarily something more prejudicial about a foreign shareholding than a domestic one. I believe however, that we have to be careful about the possibility that we and the employees of certain major companies employing substantial numbers of our people and with very important interests involving raw materials and production in extractive industries may wake up one day to find that an effective controlling interest has been acquired on top of an initial interest built up somewhat covertly.

Mr. Nicholas Baker: Will my hon. Friend agree that the problem is that an offence may be committed under what will be section 67 of the Act, but, because an overseas concert party goer is involved and the offence is not a United Kingdom offence, the overseas party goer will not be guilty of a United Kingdom offence? There will be no sanction against an overseas party in those circumstances. Does my hon. Friend consider that there


should be power to freeze the shares in circumstances where a conviction for the offence has not been obtained but where the evidence exists that an offence may have been committed?

Mr. Nelson: I understand that under this legislation there is a power where someone refuses to comply with an investigation to impose in the last resort a freezing in accordance with section 174 of the Companies Act 1948. There is a power to provide a freezing where someone refuses to comply. I agree with my hon. Friend, who makes a most important point that the arm of the law is exceedingly short when trying to tackle such people abroad. That is why during Second Reading I suggested that we should go further and that companies should be able to cancel the shares involved. Even though a foreign investor may be acting illegally and even though a British investor may be acting illegally and convicted of acting illegally, this does not destroy financially what they have done. Although their interests in the company may be temporarily frozen, as provided under this and other legislation, they can subsequently obtain the full value of benefits of that shareholding.
Therefore certain firms, particularly foreign companies, are prepared to take that risk, because it is probable that they will benefit from it and realise the full profit at the end of the day. It would be a sufficient sanction—indeed, I fear it may be the only sanction—if we hung over foreign companies the sword of Damocles that in the last resort shares that they had acquired and failed to disclose, or those that they had acquired improperly, could be cancelled so that the benefit arising from them would disappear.

Mr. Clinton Davis: The hon. Member participated in our debates on this matter last year and we were in almost total accord on the subject, but he will recall that the Opposition's new clauses, which the Government refused even to consider in principle, encompassed precisely the points that he is raising. Like the hon. Gentleman, I regret that a more stringent regime is not included in the Bill.

Mr. Nelson: I have much sympathy with that point. It was a particular source of regret to me, and partly explains why I am speaking at a little more length than I would normally do, that personal circumstances, of which some hon. Members are aware, prevented me from attending the Standing Committee when we were discussing these matters. I had hoped to contribute to those debates.
However, we have legislation which attempts to deal with the problem. I congratulate the Government on that. It was thought initially that it would be too difficult, which is why the provisions were introduced as new clauses. I do not wish to be churlish about what the Government have done and I welcome the fact that they have brought forward new proposals, but I still fear that they do not go far enough and that many foreign companies have the resources and incentive to take effective controlling interests in major British companies, public and private, with strategic interests and many employees. We should be the proper defenders not only of the national interest but of the interests of other shareholders who may be adversely affected by such events.
As a Conservative I believe in freedom, but it must be balanced with responsibility. I believe in more freedom in


economic and social policies than do Labour Members, but I attach to that freedom a desire to ensure that individuals and corporations act responsibly.
We have derived great benefit from having free markets, a free Stock Exchange and an ability to go into the market and acquire shareholdings in companies. But responsibilities are attached to such freedoms and if those who use the freedoms fail to observe the responsibilities the freedoms will surely be curtailed in the long run.
It is a sad reflection on recent events in the City and recent practices of some of our best-known names that have histories of integrity in this country and elsewhere that their actions and the way that they have set about acquiring companies overtly and without declaring their interests make it necessary for us to consider legislation. We are introducing measures, and I hope that if we find that they are inadequate we shall actively consider the possibility of tightening them up in ways which I believe to be necessary now.

Mr. Clinton Davis: I pay tribute to the hon. Member for Chichester (Mr. Nelson), because he has spoken with knowledge and expertise on this subject on a number of occasions. It was a pity that, for understandable reasons, he could not contribute to our debates on this topic in Committee. He would have had some valuable advice to offer.
Like the hon. Member, I do not wish to be churlish about the Government's attempts to deal with a serious situation which was highlighted in the Consolidated Gold Fields case, but I am not confident that they have devised a system which will overcome the perils that may confront British companies in future.
The hon. Member for Chichester seized on the difficulty of dealing with overseas interests. I wish that the Government had been bolder and had accepted the philosophy that the hon. Member for Chichester and I adumbrated, in uncommon unison, when we discussed these matters last year.
Experience will determine whether the Government's confidence that they have got the answer is justified or whether we are right in our lack of confidence in their proposals. I hope that the Government will be proved right. We all hope that the loophole will be plugged, and I do not underestimate the problems and difficulties that confronted the Government and their advisers on this extremely difficult topic.
I shall say something more on the subject later and I will leave it there for the moment, but the House is indebted to the hon. Member for Chichester for his observations.

Mr. Peter Rees: I echo the appreciation of the hon. Member for Hackney, Central (Mr. Davis) of the contribution of my hon. Friend the Member for Chichester (Mr. Nelson), who has obviously thought long and profoundly about these complex clauses.
However, I should emphasise that the purpose of the clauses is not to defend British companies in any narrow nationalistic sense. We rightly pride ourselves on having an open economy and we have taken advantage of other open economies. My hon. Friend the Member for Chichester hardly needs reminding that British companies have moved in the American market, particularly when the dollar was weak, to make suitable acquisitions there. Therefore, who are we to complain, in a general sense,

when people inside or outside our economy make use of our stock market legitimately to take over British companies?
There may be circumstances in which the national interest is involved in a security sense, but I suggest that those should not be dealt with through the medium of Companies Acts which are designed to regulate and protect the position of shareholders, employees and creditors. We must proceed in that broad sense. We should not cloud the issue, and I do not suggest that my hon. Friend the Member for Chichester or the hon. Member for Hackney, Central has attempted to do so, by introducing questions of national security on these important but tightly defined issues.
The question to which we must address ourselves is the protection of a minority shareholder who may be put at a disadvantage by a dawn raid. He may not have sufficient time to reflect on whether he should accept offers being made in the market place.
Concern over this matter has been stimulated by a number of incidents going back to the Consolidated Gold Fields case. It is not necessary to go into the details of any particular case and, indeed, we may put the wrong construction on one case, but we must identify the problem and consider whether the Bill deals with it adequately.
The hon. Member for Hackney, Central expressed a natural scepticism about whether we have resolved the problems. I come very new to Companies Bills, but I have lived on the Back Benches and Front Benches in both Government and Opposition with many Finance Bills, when we have dealt with problems of comparable complexity. I have never been dogmatic about the ability of Governments, whether Labour or Conservative, to get it right, but we hope that we get it right.

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Mr. Clinton Davis: The difference is that in a Finance Bill one can try again the year after. There has been that precedent in company legislation over the past two years, but we are anxious that it should not be repeated. There is that difference, which perhaps comes back to what I said yesterday.

Mr. Rees: I appreciate that, of course. It is a very telling point. I should be the last person in my present position to want to inflict another Companies Bill on a long-suffering House in 1982. We hope that this legislation will stand as long as some of the earlier companies legislation did. Of course we want to get it right. We do not want to have to go on refining the provisions, but, as I said, I hope that we have got it right.
It is to deal purely with the protection of the smaller shareholder, who is less versed in these matters and who does not have the necessary information, that we introduced this complex of provisions. We do not seek to build a wall around British companies to prevent their takeover by outside interests. Strategic interests may be involved, which we can consider on another occasion in the context of other legislation, but a Companies (No. 2) Bill 1981 is not the appropriate medium to devise such protection.
These amendments are designed to clarify what we mean by "arrangement". They provide a convenient peg for a far-ranging and perhaps helpful and interesting debate, but that is all we are tending to do. We realise that there may be many arrangements that fall short of anything


that would be enforced in a British court of law which may, none the less, open the door and provide the basis for a concert party, a dawn raid, whatever one may call these unattractive operations. The purpose of the amendments, which I commend with suitable modesty, is purely to clarify and elucidate.
However, there is a further point that was raised by both my hon. Friend the Member for Chichester and by the hon. Member for Hackney, Central, seeking to say that there is no way to enforce these against the extra-territorial offeror. Both hon. Members, who by now have probably a considerably deeper understanding of the Bill than I do, having sat through the debates in Committee, will realise that under clause 85 the Secretary of State has power to direct that the shares should be sold. There is no extraterritorial limit there. I can reassure all hon. Members that there is a remedy that can apply equally to those who abuse the provisions from inside or outside our jurisdiction.
We can identify a community of aim here. We can all have reservations, even those on the Front Bench, about whether we have absolutely hit the target, but I hope that on that basis the House will accept the amendments, which are designed only to clarify and elucidate what was in the draft Bill and which has been subject to much close scrutiny in Committee upstairs. I hope that we can leave it there, and that we shall not need to inflict any further elucidation on the House in the later years of this Parliament.

Amendment agreed to.

Amendments made: No. 62, in page 72, line 42, leave out 'or arrangement'.

No. 63, in page 73, line 16, leave out
'Subject to subsection (5) below'.

No. 64, in page 73, leave out lines 26 to 29 and insert—

'(5) this section shall not apply to an agreement which is not legally binding unless it involves mutuality in the undertakings, expectations or understandings of the parties to it.'.—[Mr. Peter Rees.]

Clause 63

OBLIGATION OF PERSONS ACTING TOGETHER TO KEEP EACH OTHER INFORMED OF RELEVANT FACTS

Amendment made: No. 65, in page 76 leave out lines 4 to 7 and insert—
(6) A person who is a party to an agreement to which section 62 of this Act applies shall be under an obligation to notify each other party to the agreement, in writing, of his current address—

on his first becoming subject to the requirements of this section; and
on any change in his address occurring after that time and while he is still subject to those requirements.'—[Mr. Peter Rees.]

Clause 65

INTERESTS TO BE NOTIFIED

Mr. Clinton Davis: I beg to move amendment No. 182, in page 77, line 40, leave out 'is entitled to exercise' and insert 'in practice exercises'.
I raised this matter during the "clause stand part" debate in Committee. It arose because the Council for the Securities Industry expressed concern about some inadequacy in the drafting of the Bill and thought that the words "in practice exercises" were an improvement on the Bill. 

The Minister has had an opportunity to consider the matter, and I am somewhat disappointed that the Secretary of State did not do what he has done on other occasions and gently and almost without notice add his name to our names against certain amendments. Why did he not do so on this occasion? I am bound to say that there is some force in the representations that were made by the CSI. The expression "is entitled to exercise" is one with which I am not familiar in company legislation. I hope that the Minister will tell us, as he has been given notice of the matter, whether it has been used elsewhere in company legislation or whether it is a novel phrase. Is there the ambiguity in the expression that the CSI says there is? Why does the wording of our amendment not eliminate the ambiguity which the CSI considers lies in the wording of the Bill?
During our debates the Under-Secretary said that the wording that I have proposed in the amendment, and which I merely suggested on Second Reading, would damage the interests of investment protection committees. I expressed surprise that the CSI, which I should have thought would have been concerned about the question of investment protection committees, nevertheless still considered that these words were preferable. Apparently, the CSI did not believe that what the Minister said was valid.
Perhaps the matter could be put in a more recent context. I am not familiar with the discussions that have taken place between the Department's officials, perhaps the Minister, and the CSI and other bodies. Therefore, I hope that the Minister will tell us what the reaction was. If the Minister's reply is forthcoming, I may hesitate to encourage hon. Members who normally would be impelled to support the amendment to go into the Division Lobbies tonight. It is up to the Minister. He can avoid that calamity.

Mr. Peter Rees: I fully understand the motives which led the hon. Member for Hackney, Central (Mr. Davis) and his hon. Friends to table the amendment. As he rightly says, it was foreshadowed in Committee, and the matter was touched on in consultation prior to the Committee stage by the Council for the Securities Industry. However, the amendment, which presumably was designed to enlarge rather than narrow the existing definition, might have the contrary effect, in that it would seem to exclude those who were entitled to exercise any right conferred by the holding of shares if they did not exercise that right in practice. Beyond that, I think that it would introduce a measure of ambiguity as to what in fact constituted the practical or consistent exercise of a right.
We have therefore felt, on reflection, that it would be better to limit it to those who are entitled to exercise the right because that would cover those who habitually exercise it and those who are entitled to do so but do not do so. In other words, the present definition is a practical definition for which there are many precedents. Although I think that we have scrutinised as best we can the statute books and the cases, I do not think that there are any precedents—perhaps I should cover my flank by saying "no respectable precedents"—for the phrase "in practice exercises".
Having, I hope, establshed that there is an identity of objective here, and having recognised the assiduity which obviously the hon. Member has exercised in trying to devise a solution to this problem, I hope that on reflection


the hon. Member will recognise that possibly, with all its limitations, the phrase to be found in the clause will suit the purpose for which it has been designed.

Mr. Clinton Davis: So engaging, so beguiling, so siren-like is the voice of the hon. and learned Gentleman that all those hundreds of Members who have been waiting with bated breath to see whether they would be called to go into the Division Lobbies may sigh a breath of relief. I do not propose to challenge the matter in a Division. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Clause 66

INTERESTS TO BE DISREGARDED

Mr. Peter Rees: Mr. Peter Rees: I beg to move amendment No. 66, in page 79, line 27, leave out from 'section' to 'has' in line 28 and insert
'444 of the Income and Corporation Taxes Act 1970'.
This is a technical amendment to cure what is in effect a defect of drafting. The original clause was meant to refer to a provision in the Taxes Act which defined "settlor". In fact, the reference should have been to the Income and Corporation Taxes Act 1970, section 444. It was not. It was to cure this error that the amendment was put down. On that basis, I hope that the House will accept it.
Amendment agreed to.

Mr. Peter Rees: Mr. Peter Rees: I beg to move amendment No. 67, in page 80, line 9, leave out from first 'by' to 'which' in line 11 and insert
'way of security only either by the Bank of England or by the Post Office for the purposes of a transaction entered into in the ordinary course of that part of the business of the Post Office'.

The effect of the amendment is to ensure that interests held by the Bank of England by way of security only shall be disregarded for the purposes of clauses 58 to 60. I am sure that on that basis it will commend itself to the House.
Amendment agreed to.

Clause 68

REGISTER OF INTERESTS IN SHARES

Amendment made: No. 68, in page 82, line 18, leave out 'fourteen' and insert 'ten'.—[Mr. Peter Rees.]

Mr. Peter Rees: I beg to move amendment No. 69, in page 82, line 23, leave out 'ten' and insert 'six'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments No. 77 and 79.

Mr. Rees: A number of commentators in this context have said, both during and subsequent to the Committee stage, that 10 years in this context, even 10 calendar years as defined, is too long for this period, and I think that this view commended itself to the Committee. It was therefore in deference to the Committee's views that we put down these amendments, which are designed to reduce the period of 10 years to six years.
Amendment agreed to.

Clause 71

INVESTIGATION AND REPORT ON REQUISITION OF MEMBERS

Mr. Peter Rees: I beg to move amendment No. 70, in page 85, line 10, leave out from 'period' to 'after' in line 11.

Mr. Deputy Speaker: Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:

Government amendment No. 71.

Amendment No. 184, in page 85, line 12, at end insert—
5(A)(a) If any investigation carried out by a company in pursuance of a requisition under this section has not been concluded within a period of fifty-six days from the date of the requisition the company or the requisitionists may give notice in writing to the company to prepare within fourteen days an interim report on the investigation and, in the event, the provisions of sub-sections (5) (7) and (9) of this section shall apply to the interim report save that for the purposes prescribed by subsection (5) the interim report shall be made available within a period of fourteen days from the date of the completion of the report.
(b) The procedures set out in paragraph (a) of this sub-section may be invoked for each successive period of 56 days from the date of the requisition'.

Government amendments Nos. 72 to 76, and Government amendment No. 78.

Mr. Rees: When the clause to which these amendments relate was discussed in Standing Committee, the hon. Member for Hackney, Central (Mr. Davis) made what I think my hon. Friend the Under-Secretary described at the time as a "hopeful and interesting" suggestion that companies should be required to make an interim report within a certain period if they had not made a final report. It was in deference to this suggestion that we put down our amendments. I hope that they will commend themselves to the House.

Amendment agreed to.

Amendments made: No. 71, in page 85, line 12, at end insert—
'(5A) Where—

a company undertakes an investigation in pursuance of a requisition under this section; and
that investigation is not concluded before the end of the period of three months beginning with the date immediately following the date of the deposit of the requisition;
it shall be the duty of the company to cause to be prepared, in respect of that period and each successive period of three months ending before the conclusion of the investigation, an interim report of the information received during that period in pursuance of the investigation, and each such interim report shall be made available at the registered office of the company within a reasonable period after the end of the period of three months to which it relates.
(5B) The period for making any report prepared under this section available as required by subsection (5) or (5A) above shall not exceed fifteen days.'.

No. 72, in page 85, line 13, leave out 'in pursuance of subsection (5) above' and insert 'under this section'.

No. 74, in page 85, line 20, leave out 'the report' and insert 'any report prepared under this section'.

No. 75, in page 85, line 25, leave out 'subsection (5) above' and insert 'this section'.

No. 76, in page 85, line 34, after '(5)' insert 'or (5A)'.

No. 77, in page 85, line 35, leave out 'ten' and insert 'six'.

No. 78, in page 85, line 39, at end insert '(5A)'.—[Mr. Peter Rees.]

Clause 73

PROVISION FOR REMOVAL OF CERTAIN ENTRIES IN REGISTER

Amendments made: No. 79, in page 87, line 4, leave out 'ten' and insert 'six'.

No. 80, in page 87, line 18, leave out 'twenty-one' and insert 'fifteen'.—[Mr. Brooke.]

Clause 74

PROHIBITION OF REMOVAL OF ENTRIES IN REGISTER

Mr. Peter Rees: I beg to move amendment No. 81, in page 88, line 21, at end insert—

'(1A) If an entry is deleted from a company's register of interests in shares in contravention of subsection (1) above the company shall restore that entry to the register as soon as is reasonably practicable.'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 82 and 83.

Mr. Rees: As the House will know, clause 73(1) enables a company in certain circumstances to remove an entry from its register of interests in shares. Clause 74(2) makes it an offence for a company to remove an entry except in certain specified circumstances. As drafted, the offence created by clause 74 is a continuing offence, but the removal of an entry is, of its nature, a single act which cannot be continued. It was felt, therefore, that this was rather unreasonable, and therefore it is to limit the operation of the offence that these amendments are set down. I hope that the House will accept them on that basis.
Amendment agreed to.
Amendments made: No. 82, in page 88, line 22, after '(1)', insert 'or (1A)'.
No. 83, in page 88, line 25, after 'contravention', insert 'of subsection (1A)'.—[Mr. Peter Rees.]

Clause 75

INSPECTION OF REGISTER AND REPORTS

Amendments made. No. 84, in page 88, line 35, leave out from 'company' to 'or' in line 38 and insert

or of any other person without charge.

(2) Any such member'.

No. 85, in page 88, line 40, leave out from 'or to 'and' and insert
'ten pence or such less sum as the company may prescribe, for every hundred words or fractional part thereof required to be copied'.

No. 86, in page 89, line 13, at end insert—
'(5) The Secretary of State may by regulations made by statutory instrument substitute a sum specified in the regulations for the sum for the time being mentioned in subsection (2) above.'.—[Mr. Peter Rees.]

Clause 77

INTERPRETATION

Amendments made: No. 87, in page 90, leave out lines 1 to 5.

No. 88, in page.90, leave out lines 6 to 9 and insert—

'(4) Where the period allowed by any provision of this Part of this Act for fulfilling any obligation is expressed as a number

of days, any day that is a Saturday or Sunday or a bank holiday in any part of Great Britain shall be disregarded in reckoning that period.'.—[Mr. Peter Rees.]

Clause 78

REPEALS, TRANSITIONAL PROVISIONS AND SAVING

Amendment made: No. 89, in page 90, line 40, leave out 'fourteen' and insert 'ten'.—[Mr. Peter Rees.]

Mr. Peter Rees: I beg to move amendment No. 90, in page 91, line 4, leave out '(2)' and insert '(1)(b)'.
This is purely a drafting amendment. Clause 78(6) contained a wrong reference. This amendment cures that error.
Amendment agreed to.

Clause 85

AMENDMENT OF SECTION 174 OF THE 1948 ACT

Mr. Eyre: I beg to move amendment No. 91, in page 95, line 42, at end insert—

(2A) The following subsections shall be inserted after subsection (2)—

"Where shares are subject to the restrictions imposed by subsection (2)(a) of this section any agreement to transfer the shares or in the case of unissued shares the right to be issued with the shares shall be void except an agreement to sell the shares on the making of an order made under subsection (3A)(b) of this section.
Where shares are subject to the restrictions imposed by subsection (2)(c) or (d) of this section any agreement to transfer any right to be issued with other shares in right of those shares or to receive any payment on those shares (otherwise than in a liquidation) shall be void except an agreement to transfer any such right on the sale of the shares on the making of an order made under subsection (3A)(b) of this section".'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 97 and 100.

Mr. Eyre: These amendments to clause 85 make void, subject to one qualification, first, any agreement to transfer shares which are subject to restrictions imposed under section 174 as it is to be amended, and, secondly, any agreement to transfer any right to be issued with shares arising from the ownership of restricted shares or any right to receive any payment on those shares other than in a liquidation. The qualification is that agreements which are made contingent upon restrictions being lifted on the ground specified in the new subsection (3A)(b) to be introduced into section 174 by clause 85 are not invalidated. Agreements made before the new provisions come into force will not be invalidated.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 92, in page 96, line 6, leave out "subsection (3B) below" and insert "subsections (3B) and (4A) of this section'.

Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 95 and 98.

Mr. Eyre: These amendments achieve three ends concerned with the implications in detail of restriction of shares under section 174 of the 1948 Act as amended by the clause. First, they provide that in circumstances in which an order has been made lifting the restrictions imposed under section 174(2)(a) and (b)—on transfers of shares and on voting rights respectively—but continuing


those imposed under section 174(2)(c) and (d), on issue of further shares and on payments from the company respectively, it will not be necessary to establish either of the grounds set out in what will be section 174(3A), as already contained in clause 85, before an order can be made lifting the continued restrictions. Second, they enable the court to direct that the costs of a person who has made an application under what would be section 174(3B) or (3C) should be paid out of the proceeds of sale of the shares. Finally, they make it clear that when the court directs that shares be sold it may continue the restrictions imposed by paragraphs (c) and (d) of section 174(2) if the court thinks fit.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 93, in page 96, line 31, after 'under', insert 'subsection (3B) of'.
This amendment makes it clear that the proceeds of sale of restricted shares will be paid into court only when the court has ordered a sale under what will be section 174(3B) of the 1948 Act and not when the court or the Secretary of State has ordered that restrictions be lifted in order to facilitate a sale that has been approved under what will be section 174.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 94, in page 96, line 33, after 'are', insert 'beneficially'.

Mr. Deputy Speaker: With this, it will be convenient to take Government amendment No. 96.

Mr. Eyre: These amendments to the new subsections (3D) and (3E) of section 174 already contained in clause 85 make it clear that only a person who had a beneficial interest in shares that have been sold in pursuance of an order of the court made under section 174, new subsection (3B), may apply for payment to be made to him out of the proceeds of sale. As presently drafted, the clause would allow a purely nominee holder to apply for payment.

Amendment agreed to.

Amendments made: No. 95, in page 96, line 37, after 'shall', insert
'subject to subsection (3F) of this section'.

No. 96, in page 96, line 39, leave out 'an' and insert 'a beneficial'.

No. 98, in page 96, line 43, at end insert—
'(3F) On granting an application for an order under subsection (3B) or (3C) of this section the court may order that the costs of the applicant shall be paid out of the proceeds of sale; and, where an order under this subsection is made, the applicant shall be entitled to payment of his costs out of the proceeds of sale before any person interested in the shares in question receives any part of those proceeds.'".
(3A) In subsection (4) (continuation of subsection (2)(c) and (d) restrictions) after the words "those shares" there shall be inserted the words "or which is made under subsection (3B) of this section".
(3B) The following subsection shall be inserted after subsection (4)—
(4A) Subsection (3A) of this section shall not apply in relation to any order of the court or of the Secretary of State directing that shares shall cease to be subject to any restrictions which have been continued in force in relation to those shares by virtue of subsection (4) of this section.".

No. 97, in page 96, line 43, at end insert—

'(3C) in subsection (5) (criminal offences) the following paragraph shall be inserted after paragraph (c) "or'
(d) being the holder of any such shares, or being entitled to any such right as is mentioned in subsection (2B) of this section, enters into any agreement which is void by virtue of subsection (2A) or (2B) of this section;".'.—[Mr. Brooke.]

Mr. Eyre: I beg to move amendment No. 99, in page 97, line 3, leave out from 'any' to 'subject' in line 5 and insert
'shares which on the appointed day are'.
The purpose of the amendment is to make it clear that the application of the existing provisions of section 174 for the purpose of restrictions applying to shares on the day the provisions of clause 85 are brought into force is preserved.

Amendment agreed to.

Amendment made: No. 100, in page 97, line 5, at end insert
'and subsection (2A) above shall not apply in relation to any agreement made before the appointed day'.—[Mr. Brooke.]

Clause 86

POWERS OF SECRETARY OF STATE UNDER SECTION 334 OF THE 1948 ACT

Mr. Eyre: I beg to move amendment No. 101, in page 97 line 19, at end insert—
'(1A) In section 334, the following subsection shall be inserted after subsection (3)—'
(3A) An answer given by a person to a question put to him in exercise of the powers conferred by subsection (3) of this section may be used in evidence against him.
The amendment provides that an answer given by a person to a question put to him in the course of an investigation under section 334 of the 1948 Act—as it is to be amended by clause 86 of the Bill—may be used in evidence against him.
Amendment agreed to.

Clause 87

DISQUALIFICATION OF DIRECTORS AND OTHERS FROM MANAGING COMPANIES ETC.

Mr. Eyre: I beg to move amendment No. 102, in page 98, line 32, after 'the', insert 'promotion, formation or'.

Mr. Deputy Speaker: With this, it will be convenient to take Government amendments Nos. 103 to 107, 141, 152, 163, 164, and 165.

Mr. Eyre: These amendments will make further small improvements to those parts of the Companies Acts which provide for the disqualification of directors from taking part in the management of companies.
Amendment agreed to.
Amendments made: No. 103, in page 99, line 10, at end insert—
'Subject to subsection (1C) of this section, subsection (1)(c) of this section shall apply in relation to any offence committed or other thing done before the date on which section 87 of the Companies Act 1981 came into force but a disqualification order made on the grounds of such offence or other thing done shall not be made for any period in excess of five years.'.
No. 104, in page 100, line 5, leave out 'and' and insert—
'() in relation to the granting of leave to promote or form a company, means any court with any jurisdiction to wind up companies; and'.

No. 105, in page 100, line 17, leave out 'lay' and insert 'deliver'.

No. 106, in page 101, leave out lines 11 to 14 and insert—
'(2) The following subsection shall be substituted for subsection (4) of section 188—'
(4) An application to a court with jurisdiction to wind up companies for the making of a disqualification order against any person may be made by the Secretary of State or the official receiver or by the liquidator or any past or present member or creditor of any company in relation to which that person has committed or is alleged to have committed an offence or other default; and on the hearing of any such application made by the Secretary of State or the official receiver or the liquidator or of any application for leave made by a person against whom a disqualification order has been made on the application of the Secretary of State, official receiver or liquidator, the Secretary of State, official receiver or liquidator shall appear and call the attention of the court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses.

No. 107, in page 101, line 27, leave out from 'made' to end of line 29 and insert—
'under section 28 shall have effect as if made under section 188 of the 1948 Act and any application made before the appointed day for such an order shall be treated as an application for an order under section 188.'.—[Mr. Brooke.]

Clause 94

REGISTRATION OF PARTICULARS OF MEMBERS' CLASS RIGHTS

Mr. Eyre: I beg to move amendment No. 108, in page 103, line 40, leave out
'more than one class of members'
'and insert—
'any class of members with such rights as are mentioned in subsection (1) above,'.

Mr. Deputy Speaker: With this, it will be convenient to take Government amendment No. 109.

Mr. Eyre: These amendments correct an error in the drafting of clause 94, which requires a company that has created a class of members with rights that are not stated in its memorandum and articles to deliver to the Registrar of Companies a statement of the rights.

Mr. Les Huckfield: I do not seek to detain the House, but I should like an assurance from the Minister. I understand that the amendments would affect section 110 of the 1948 Act. I seek the Minister's assurance that we shall not take a backward step after having taken what I and many others consider to be a step forward. As I interpret clause 93, and particularly clause 94, the provisions will affect companies limited by guarantee. The Minister will know that I have been much exercised by a company limited by guarantee called the Performing Right Society. I do not wish to go into the details of that society's activities, but the Minister will recall that when I last raised the need for an inquiry into the PRS during an Adjournment debate, he pointed me in the direction of the amendment to section 110 of the 1948 Act, represented in clause 94.
I seek the hon. Gentleman's assurance that we shall not undermine the importance of clause 94. The Minister knows the criticisms that I and many others have made of

the PRS. An oligarchic few—a hidden 4 per cent. of the total membership—control the society. That means that they control the fate of Great Britain's entire music manufacturing industry as well as the economic fate of those working within it. Therefore, the provision is important. I should not like amendments Nos. 108 and 109 to detract from that.
As the clause stands, I understand that it will provide that non-share companies such as the PRS will be obliged to reveal to their respective memberships, as well as to the public, which of their members have votes and how many. In that way members and the public will know who controls non-share companies. That does not go as far as many of us would like. We should like many of the PRS's internal abuses to be corrected. As it stands, clause 94 will not do much to control such abuses.
I should not like to witness any backtracking on clause 94 and I should like an assurance to that effect from the Minister. Backtracking or undermining of the significance of clause 94 will not help us to do something about these internal abuses. The chief internal abuse about which I have been much exercised is that the governing council of the Performing Right Society has awarded as many as 20 votes to a selected 400 of its 12,000 membership. That gives them effective control of the society. It would help many of us to know who has those 20 votes and how they exercise them.
The amendment goes part of the way and I welcome it. I should welcome even more the Minister's assurance that amendments Nos. 108 and 109 will not undermine the step forward. Although it is a small step forward, I hope that it is not the last step forward. I shall continue to press the Minister to take that direction.

Mr. Eyre: I remember the interest in this matter by the hon. Member for Nuneaton (Mr. Huckfield). I have listened carefully to him. I assure the hon. Gentleman that the amendments will not detract from the effect of clause 94. The purpose of the amendments is to correct a drafting error which would have resulted in unnecessary duplication in the provision of information. The hon. Gentleman takes a personal interest in clause 94. I appreciate its importance to him. I was glad to note that the hon. Gentleman shares our view that clause 94 will result in a useful addition to the information disclosed by companies.
It is not for me to comment on the internal affairs of a particular company. I emphasise that the clause was not drafted with one particular company in mind. It has general application for companies without a share capital. It should be read in that general context in relation to company law. I repeat my assurance that the amendments do not detract from the effect of clause 94.
Amendment agreed to.
Amendment made: No. 109, in page 103, line 43 leave out 'each' and insert 'any such'.—[Mr. Eyre.]

Clause 96

AMENDMENT OF SECTION 283 OF THE 1948 ACT

Amendment made: No. 110, in page 105, leave out lines 24 to 26.—[Mr. Eyre.]

Clause 99

EXCLUSION FROM SECTION 48 OF THE 1980 ACT OF ARRANGEMENTS MADE BETWEEN CERTAIN GROUP COMPANIES OR BY COMPANIES IN LIQUIDATION

Mr. Eyre: I beg to move amendment No. 111, in page 107, line 31 leave out '(6) and (7)' and insert '(6), (7) and (8)'.

Mr. Deputy Speaker: With this we may discuss Government amendments Nos. 112 and 113.

Mr. Eyre: Amendments Nos. 111 and 112 are consequential amendments made necessary by the addition of a new subsection to clause 99.
Amendment No. 113 ensures that the requirement in section 48 of the 1980 Act to submit arrangements of substantial value between a company and one of its directors for approval by a general meeting is waived if the director concerned acquires the assets solely by virtue of being a shareholder of that company.
Amendments agreed to.
Amendments made: No. 112, in page 107, line 32 leave out first 'subsection' and insert 'subsections'.
No. 113, in page 108, line 3 at end add—
'(8) Subsection (1)(a) above shall not apply in relation to any arrangement whereby a person is to acquire an asset from a company of which he is a member if the arrangement is made with that person in his character as such member.'.—[Mr. Eyre.]

Clause 105

INTERPRETATION

Amendment made, No. 114, in page 109, line 40, leave out "'public company" and "the statutory maximum"' and insert 'and "public company"'. —[Mr. Eyre.]

Clause 106

CITATION AND COMMENCEMENT, ETC.

Mr. Eyre: I beg to move amendment No. 115, in page 110, line 12[Clause 106], after 'except', insert
'sections (Temporary extension of power to require company to change its name) and (Conversion of creditors' voluntary winding up to members' voluntary winding up in certain circumstances) and'.
The amendment provides that clause 34 and 35 shall come into effect on Royal Assent.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 116, in page 110, line 14, after 'instrument', insert
'and different days may be appointed for different purposes'.
This amends clause 106(3) which provides for the commencement of the provisions of the Bill on days to be appointed by statutory instrument, except in the case of those provisions that come into force on Royal Assent. The amendment allows different days to be appointed for different purposes in respect of any particular provision of the Bill. That will provide flexibility to permit, for example, the provisions in part I to be commenced for overseas companies at a different time from their commencement for British companies. The amendment will facilitate the process of commencement.
Amendment agreed to.

Schedule 1

(SCHEDULE TO BE INSERTED IN THE 1948 ACT AS SCHEDULE 8)

ACCOUNTS

Mr. Eyre: I beg to move amendment No. 117, in page 115, line 5, at end insert '(8A)'.

Mr. Deputy Speaker: With this we may take Government amendments Nos. 118 to 120.

Mr. Eyre: The amendments require the amount for creditors in respect of taxation and social security to be shown separately from the amount for "other creditors". The European Commission pointed out that procedure to the Government as it is required by the text of the original directive.
Amendment agreed to.
Amendments made: No. 118, in page 115, line 17, at end insert '(8A)'.
No. 119, in page 117, line 24, at end insert '(8A)'.
No. 120, in page 118, line 41, at end insert—
'(8A) Other creditors including taxation and social security (Format 1, items E.8 and H.8 and Format 2, item C.8)'
The amount for creditors in respect of taxation and social security shall be shown separately from the amount for other creditors'.—[Mr. Brooke.]

Mr. Eyre: I beg to move amendment No. 121, in page 129, line 17, at beginning insert
'Subject to sub-paragraph (4A) below'.

Mr. Deputy Speaker: With this we may take Government amendments Nos. 122 and 123.

Mr. Eyre: The effect of the amendments is that in determining the "relevant alternative amount" for the purpose of paragraph 27(3)(b) of schedule 1, the most recent actual purchase price or production cost is to be used only if it is more appropriate than the replacement cost.
Amendment agreed to.
Amendments made: No. 122, in page 129, line 23, leave out from 'date' to end of line 28.
No. 123, in page 129, line 28, at end insert—
'(4A) The relevant alternative amount may be determined by reference to the most recent actual purchase price or production cost before the balance sheet date of assets of any class included under the item in question instead of by reference to their replacement cost as at that date, but only if the former appears to the directors of the company to constitute the more appropriate standard of comparison in the case of assets of that class.'.—[Mr. Brooke.]

Mr. Eyre: I beg to move amendment No. 124, in page 130, line 20, leave out
'either item B.III or item C.III'
and insert 'item B.III'.

Mr. Deputy Speaker: With this we may take Government amendment No. 125.

Mr. Eyre: The amendments allow current asset investments to be included in the accounts at current cost as opposed to the present draft of paragraph 31(3) of schedule 1 which allows them to be included at either market value or a valuation considered appropriate by the directors.
Amendment agreed to.
Amendment made: No. 125, in page 130, line 29, at end insert—


'(3A) Investments of any description falling to be included under item C.III of either of the balance sheet formats set out in Part I of this Schedule may be included at their current cost.'.—[Mr. Brooke.]

Mr. Eyre: I beg to move amendment No. 126, in page 134, line 29, leave out from 'item' to end of line 29 and insert 'either—'.

Mr. Deputy Speaker: With this we may take Government amendments Nos. 127 and 128.

Mr. Eyre: The House will be pleased to know that the amendments clarify that the table of fixed asset movements should disclose the gross amount of assets rather than the net book amounts.
Amendment agreed to.
Amendments made: No. 127, in page 134, line 32, leave out 'and' and insert 'or'.
No. 128, in page 134, line 33, at end insert—
'(leaving out of account in either case any provisions for depreciation or diminution in value)'.—[Mr. Brooke.]

Mr. Eyre: I beg to move amendment No. 129, in page 136, line 11, at end insert—
'(3) Particulars shall be given of each provision included in the item "other provisions" in the company's balance sheet in any case where the amount of that provision is material.'.
The amendment requires provisions shown in the balance sheet under "other provisions" to be disclosed in the notes on the accounts if they are material.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 130, in page 136, line 17, leave out from 'sheet' to 'are' in line 19 and insert
'there shall be stated—'
(a) the aggregate amount of any debts included under that items which'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 131 and 132.

Mr. Eyre: These are minor technical amendments which, to comply fully with the provisions of the directive, make it clear that the aggregate amounts of the debts payable by instalments and other than by instalments are to be disclosed separately.
Amendment agreed to.
Amendments made: No. 131, in page 136, line 22, leave out from 'year' to 'are' in line 23 and insert
'and
(b) the aggregate amount of any debts so included which'.
No. 132, in page 136, line 25, leave out 'shall be stated'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 133, in page 138, line 14, after '(c)', insert 'or 41'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 138.

Mr. Eyre: These amendments are minor additions to paragraph 51(2) and schedule 2.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 134, in page 141, line 38, leave out from first 'of' to end of line 39 and insert
'any of the following provisions, that is to say—

sections 3 and 4 of the Companies Act 1967 (statement in notes to a company's accounts of proportion of share capital of subsidiaries or certain other bodies corporate held by that company, etc.);
sections 54 and 56 of the Companies Act 1980

(particulars of certain loans etc. to directors and others to be disclosed in notes to a company's accounts); and
paragraphs 42 and 46 above.'.
By adding to paragraph 58(3), the amendment provides for further items in respect of which corresponding amounts for the preceding financial year are not required to be disclosed.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 135, in page 147, line 36, after 'to', insert '(a)'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 136.

Mr. Eyre: These are minor clarifying amendments which extend the declaratory provision in paragraph 90 of schedule 1 on realised profits to make it clear that that provision is without prejudice to any specific provision for the treatment of profits as realised.
Amendment agreed to.
Amendment made: No. 136, in page 147, line 38, after 'practice', insert
'or (b) any specific provision for the treatment of profits of any description as realised'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 137, in page 149, line 13, at end add—
'Wholly owned subsidiaries
95. In this Schedule, "wholly owned subsidiary" has the same meaning as it has for the purposes of section 150 of this Act.'.
This is merely a clarifying amendment.
Amendment agreed to.

Schedule 2

PREPARATION OF ACCOUNTS UNDER SCHEDULE 8A TO THE 1948 ACT

Amendment made: No. 138, in page 150 line 12, at end insert—
'() in paragraph 8(1)(c) for the words from "provisos (b) and (c)" to the end there shall be substituted the words "section 40(4)(b) or (c) or 41 of the Companies Act 1981;";'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 193, in page 152, line 10, leave out '43, 44, 45' and insert '43(1)(a), 44, 45(a)(i) (b) and (c)'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 185, 186 and 187.

Mr. Eyre: These amendments have the effect of confirming the relaxations made to section 39(4) of the 1980 Act by paragraphs 43(1)(b), 43(2) and 45(bb) of schedule 3 on companies drawing up schedule 8(A) accounts—that is the old schedule 8 of the 1948 Act as amended by schedule 2. These are minor and technical amendments.
Amendment agreed to.

Schedule 3

MINOR AND CONSEQUENTIAL AMENDMENTS

Amendments made: No. 139, in page 153, line 8, at end insert—
'3A. In both section 124 and section 125 the following subsection shall be substituted for subsection (3)—
(3) If a company fails to comply with this section, the company and every officer of the company who is in default shall be liable on summary conviction to a fine


not exceeding the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-tenth of the statutory maximum.

This paragraph shall not have effect in relation to any offence committed before the appointed day.'

No. 140, in page 153, leave out lines 27 and 28.

No. 141, in page 153, line 28, at end add—
'8A. In section 187 (restrictions on undischarged bankrupts acting as directors, etc.) after the words "acts as director" there shall be inserted the words "or liquidator" and after the words "is concerned in the" there shall be inserted the words "promotion, formation or".'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 142, in page 153, line 29, leave out 'of the 1948 Act'. This amendment deletes the superfluous reference to the 1948 Act at line 29, page 153 as all the minor and consequential amendments in the first part of schedule 3 relate to the 1948 Act.
Amendment agreed to.

Mr. Geoffrey Robinson: I beg to move amendment No. 192, in page 153, line 39, leave out paragraph 10.
This amendment seeks to retain a requirement for directors' names to be shown on business letters and certain other documents, together with their nationality if they are not British or citizens of another EEC country, and any former names.
It appeared a relatively minor matter in this enormously long piece of legislation but we have raised the matter again because the Under-Secretary specifically said in Committee on the question of liability and damages, when the point was put to him succinctly by my hon. Friend the Member for Hackney, Central (Mr. Davis):
I find it difficult to answer that point but obviously there is something in it.
He said later: 
There is a good deal that I would like to say about that matter."—[Official Report, Standing Committee A, 9 July 1981; c. 545.]
I hasten to add that I am not inviting him to say a great deal tonight, although he might have something more relevant to say than he did when we debated the matter in Committee.
We shall not push the amendment to a vote. In Committee the reasons given for refusing the amendment were the usual ones—it would be tiresome, there would be too much trouble and expense and it would not be in the national interest. There was neither a genuine argument nor an answer to the anomaly that was being created in respect of the unincorporated businesses that now have to register under the Registration of Business Names Act.
Recently a small company was started in my constituency. It is concerned with the transfer of technology from universities to manufacturing industry. When deciding how to show my name as a director of the company, I thought it proper, as I had one of the most common surnames in the country, that "G. Robinson" would perhaps not be clear enough and that "Geoffrey Robinson, MP" would be best. The people trading with the company should know that they are trading with Geoffrey Robinson as a director.
Companies have a right to know with whom they are dealing. I do not know whether the Minister can say

anything about this matter tonight, although I doubt it. It is a substantial point. It is also important that companies should know with whom they are not dealing. Whilst one might say that if Lord Weinstock were to resign from the GEC there might be jubilation on Opposition Benches, many suppliers, shareholders and others would be anxious. But they would know about it without having to have his name struck off the notepaper of the GEC. There are many mini-Weinstocks—people on whom directly, and perhaps absolutely, the wellbeing of the company depends. It would be relevant if the name of such a person were suddenly to disappear from the company's notepaper in an exchange of correspondence. Many of these companies are limited liability companies although very small.
The Minister brought forward the rather pathetic argument about the requirement that EEC nationals need no longer be named. We can accept that, and as long as we are members of the EEC the position will remain. But to bring up the Jenkins report—the Jenkins committee reported in about 1962—as the reason for the change when so much of the Jenkins report is rejected on other issues, as it pleases the Minister, is rather choice. At that rate of progress, my hon. Friend the Member for Keighley (Mr. Cryer)—we are very pleased to see him with us—might have some chance of seeing the Bullock report enacted in about the year 2000.
I should like to reflect for a moment on the answers that we have had to the amendments and on the way in which this huge Bill has been dealt with. I do not think that Ministers, Opposition spokesmen, or Back Benchers on either side of the House, would consider the procedure to be very satisfactory. The fact that there is some directive from the EEC is not a good enough reason to force on companies this maze of legislation. We have had 40 new clauses and 200 amendments. In any complicated legislation there are bound to be times when the Ministers cannot readily find the notes which have been written for them in advance. Those who have to try to make sense of this sort of legislation and who are affected by its provisions daily in the real world do not thank us for it, and it does not do much credit to the House. I do not know what better system might be devised, but clearly we should not try to force this sort of burden on officials, Ministers or the House in the way that we have on this occasion.
There are no acceptable arguments for the proposed change. The arguments about reducing travel and expense, and the invocation of the national interest, are minimal when compared with the complexities that will arise with the enactment of the measure.
We believe that the amendment should be accepted by the Government. If the Minister has not had any second thoughts about it, perhaps he will tell us whether he has any new thoughts. If he has neither second thoughts nor new thoughts, I hope that he will say very little.

Mr. Eyre: I always enjoy listening to the managerial style of the hon. Member for Coventry, North-West (Mr. Robinson). He concluded his speech by seeking to direct what should be done in response to the amendment. I suppose that is how things are done in the British motor car industry. However, I am sorry to have to say to the hon. Gentleman that I must ask the House to reject the amendment.
The amendment seeks to retain the requirement for directors' names to be shown on business letters and


certain other documents—including, for example, showcards. A director would also have to give his nationality, if not British or a citizen of another EEC country, and any former names.
The present requirement, contained in section 201 of the Companies Act 1948, is of similar origin to the Registration of Business Names Act 1916. It was introduced in 1916 as a means of ensuring that the connection of enemy nationals with business enterprises in this country could be readily identified.
The effectiveness of the provision has been steadily eroded. However, since 1974, companies are not required to show the nationality of nationals of other EEC member States, and the Secretary of State has always had discretion to grant exemption from all the requirements "in special circumstances". As the hon. Gentleman knows, that is where the difficulty comes. The Department has always taken a liberal view of "special circumstances"—in the time of the hon. Member for Hackney, Central (Mr. Davis) and in my own—and has granted exemptions regularly. Applicants normally claim that the movement of directors is likely to cause frequent alterations to their letter headings, but the argument that, for example, export opportunities may be lost by disclosure of directors' names or nationality is also accepted as grounds for a direction.
In 1962 the Jenkins committee recommended that section 201 should be repealed. The committee contended that while it was convenient for persons dealing with the company to see the names of the directors on the company's letter paper, it was not essential. The information was available in a fuller and more up-to-date form, either in the records available to the public in the Companies Registration Office or from the company's own registered office. That information is, of course, the answer that I must give to the question raised by the hon. Gentleman when he said that people want to know. That is how they can find the information that they want. The committee contended, moreover, that it was an unduly onerous task, particularly for large companies where changes of directors might be frequent, to keep letter headings up to date. It also took the view that since so many exemptions had been, and are being, granted by the Department every year, with no evidence of harm arising therefrom, the section served little purpose.
It is now a statutory requirement under the European Communities Act 1972—and the hon. Gentleman will appreciate the importance of this—that companies should disclose on their letter paper particulars of their registered office, registration number and place of registration. An up-to-date list of directors will be available there. The provision made by section 201 is no longer essential for the purpose that it was intended to serve and the need to consider applications for dispensation from it places an avoidable burden on the Department of Trade. In our view, it should therefore be repealed.

Mr. Geoffrey Robinson: The hon. Gentleman still has not answered the very specific point made by my hon. Friend the Member for Hackney, Central (Mr. Davis), which I shall put again without repeating it at tedious length and in great detail, namely, that small businesses fall into a completely different category and there is the problem of liability in relation to them.
The Minister took the point in Committee and said that he would return to it on Report. I rather sense that he has not given it consideration, but we put on record that it is

a valid point and that he conceded it as a valid point in Committee. We were hoping that he would deal specifically with it on this occasion.

Mr. Eyre: It is a point of difficulty, but I am sorry that I am not able to add anything here. It is very difficult to find a solution to the problem. I should point out, however, that the hon. Gentleman regards it as more of a problem than other people do, as we have received no other representations on this point. I am sorry, but I cannot meet the hon. Gentleman on that point.
Amendment negatived.

Mr. Eyre: I beg to move amendment No. 143, in page 154, line 14, after 'Act)' insert—
'(a) in subsection (3), the following words shall be inserted after paragraph (b), that is to say, "and
(c) in an appropriate case, if the company wishes to be registered with the Welsh equivalent of "public limited company" or, as the case may be "limited" as the last words or word of its name, a statement to that effect."; and
(b)'.

Mr. Deputy Speaker: With this we may take Government amendments Nos. 144 and 145.

Mr. Eyre: These amendments permit a joint stock company registering under part VIII of the 1948 Act to use the Welsh equivalent of "public limited company" or "limited" as the last part of its name if its registered office is to be situated in Wales. It is considered that, as drafted, paragraph 13 of schedule 3 makes the use of the Welsh equivalent compulsory in such cases.

9 pm

Mr. Clinton Davis: The Minister is always keen on phonetics and he told me how to pronounce St. Piran. Perhaps he will say whether the word "cwmni" in the first line of amendment No. 144 is a typographical muddle or whether it can be pronounced by him. I think the word "cyfyngedig" in amendment No. 145 is pronounced "sifin-geddig". My memory takes me back to the days when we were discussing this matter, and I think that I am right.

Mr. Eyre: The hon. Gentleman's pronunciation of that word sounds reasonably satisfactory.
Amendment agreed to.
Amendments made: No. 144, in page 154, line 24 leave out from 'if' to 'cwmni' in line 27 and insert

'the company has delivered a statement under section 382(3)(c) of this Act to the registrar'.
No. 145, in page 154, leave out lines 32 to 34 and insert
'if the company has delivered a statement under section 382(3)(c) of this Act to the registrar, "cyfyngedig".'.

No. 146, in page 155, line 14, at end insert—
'17A. In section 455 after the definition of "share warrant" there shall be inserted the following definition—
"statutory maximum" has the meaning given by section 87(1) of the Companies Act 1980;".'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 147, in page 157, line 41, after 'shares', insert 'or debentures'.
This is a drafting amendment to correct an omission to a reference here, as elsewhere in the paragraph, to interest in debentures as well as in shares.
Amendment agreed to.
Amendments made: No. 148, in page 158, line 5, leave out 'fourteen' and insert 'ten'.
No. 149, in page 158, line 9, at end insert
'(disregarding in reckoning that period any day that is a Saturday or Sunday or a bank holiday in any part of Great Britain)'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 150, in page 158, line 22, at end insert
'(whether as it has effect in relation to an investigation under any of sections 164 to 166 of the principal Act'.
This is a drafting amendment to make it clear that an answer given by a person to a question put to him in exercise of powers conferred by section 167 of the 1948 Act, as amended by clause 81, in investigations under sections 164 to 166 of the 1948 Act, section 172 of that Act and section 32 of the 1967 Act is admissible in evidence against him.
Amendment agreed to.
Amendments made: No. 151, in page 158, leave out lines 29 to 31.
No. 152, in page 158, line 42, at end insert—
'34A. In section 29(1) of the 1976 Act (register of disqualification orders)—

for the words from "that a person" to "in the order" there shall be substituted the words "under section 188 of the Act of 1948 or section 9 of the Insolvency Act 1976;"; and'
the words from "This subsection' to the end shall cease to have effect.'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 154, in page 159, line 19, at end insert
'and the following subsection shall be added at the end of that section—'
(13) In relation to any offer to allot any securities required by subsection (1) above or by any provision to which subsection (3) above applies references in this section (however expressed) to the holder of shares of any description shall be read as including references to any person who held shares of that description on any day within the period of twenty-eight days ending with the day immediately preceding the date of the offer.
This amendment to section 17 of the 1980 Act, which secures the pre-emption rights of existing shareholders of a company when shares are allotted by the company, provides that for the purposes of the section the shareholders may be any persons who held shares within a 28-day period preceding the offer date for the new allotment.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 153, in page 159, line 26, leave out paragraph 40 and insert—
'40.—(1) In section 24 (valuation of non-cash consideration before allotment), for the words from the beginning of subsection (2) to "that class" there shall be substituted the words "(2) Subject to subsection (2A) below, subsection (1) above shall not apply to the allotment of shares by a company in connection with—
(a) an arrangement providing for the allotment of shares in that company on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to that company or the cancellation of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to that company of shares, or of shares of any particular class, in that other company);".
(2) The following subsection shall be inserted after subsection (2) of that section—
(2A) Subsection (2)(a) above does not exclude the application of subsection (1) above to the allotment of shares by a company in connection with any such arrangement as is there mentioned unless it is open to all the holders of the shares in the other company in question or, where the arrangement applies only to shares of a particular class, to all the holders of shares in that other company of that class, to take part in the arrangement.
In determining whether that is the case, shares held by or by a nominee of the company proposing to allot the shares in connection with the arrangement, or by a nominee of a company which is that company's holding company or subsidiary or a company which is a subsidiary of its holding company, shall be disregarded.

(3) In subsection (3) of that section—

for the words from the beginning to "those purposes" there shall be substituted the words "For the purposes of subsection (2)(b) above"; and
after the word "shares", in the last place where it occurs, there shall be inserted the words "or other securities".

(4) The following subsection shall be inserted (11) of that section—
(11A) It is hereby declared for the avoidance of doubt that subsection (1) above does not apply by reference to the application of an amount for the time being standing to the credit of any of a company's reserve accounts or to the credit of its profit and loss account in paying up (to any extent) any shares allotted to members of the company or any premiums on any shares so allotted; and in relation to any such allotment references in this section to the consideration for the allotment do not include any such amount so applied.".
(5) In subsection (12) the following paragraph shall be inserted before paragraph (a)—
(aa) In this section "arrangement" means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with section 206 or 287 of the 1948 Act).
This amendment provides a relaxation from the requirement in section 24 of the 1980 Act for an independent valuation of a non-cash consideration in a takeover or merger for schemes of arrangement, as defined in clause 38, for the purposes of merger accounting and for mergers in which securities other than shares are involved.
Amendment agreed to.
Amendments made: No. 185, in page 160, line 10, at beginning insert '(1)'.
No. 186, in page 160, line 18, at end insert—
'(2) The following subsection shall be inserted after that subsection—
(4A) Subject to section 43(7A) of this Act, any consideration by the directors of a company of the value at any particular time of any fixed asset of the company shall be treated as a revaluation of that asset for the purposes of determining whether any such revaluation of the company's fixed assets as is required for the purposes of the exception from subsection (4) above has taken place at that time; but where any such assets which have not actually been revalued are treated as revalued for those purposes by virtue of this subsection that exception shall only apply if the directors are satisfied that their aggregate value at the time in question is not less than the aggregate amount at which they are for the time being stated in the company's accounts.
No. 155, in page 160, line 25, after '(2)', insert '(i)'.
No. 156, in page 160, line 26, at end insert
'and (ii) in paragraph (b) for the word "proper" there shall be substituted the word "reasonable".'.
No. 187, in page 160, line 28, leave out 'and' and insert—

'(bb) the following subsection shall be inserted after subsection (7)—

"(7A) Where subsections (3)(a), (5)(a) or (6)(a) above applies to the relevant accounts, section 39(4A) of this Act shall not apply for the purposes of determining whether any revaluation of the company's fixed assets affecting the amount of the relevant items as stated in those accounts has taken place, unless it is stated in a note to those accounts—

that the directors have considered the value at any time of any fixed assets of the company without actually revaluing those assets;
that they are satisfied that the aggregate value of those assets at the time in question is or was not less than the aggregate amount at which they are or were for the time being stated in the company's accounts; and
that the relevant items affected are accordingly stated in the relevant accounts on the basis that a


revaluation of the company's fixed assets which by virtue of section 39(4A) included the assets in question took place at that time.";and'.—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 157, in page 162, line 10 after 'accounts)', insert—
(a) the following subsection shall be inserted after subsection (2)—
(2A) Subsection (2) above does not apply, in relation to the accounts prepared by any company in respect of any relevant period, to transactions, arrangements and agreements made by the company or any of its subsidiaries for any officer of the company if the aggregate amount outstanding at the end of that period under the transactions, arrangements and agreements so made for that officer does not exceed £2,500.";and
'(b)'.

Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 158.

Mr. Eyre: The amendment provides a de minimis exemption from section 56 of the Companies Act 1980, which requires disclosure in the accounts of the aggregate amounts outstanding under certain credit and loan arrangements made by the company or any of its subsidiaries for officers other than directors.
Amendment agreed to.
Amendment made: No 158, in page 162, line 14, at end insert—
'50A. In section 58 (transactions, etc. excluded from sections 54 and 57) the following subsections shall be substituted for subsection (3)—
(3) Subsections (1)(c) and (2)(c) of section 54 above do not apply, in relation to any accounts prepared by a company in respect of any relevant period, to any transaction or arrangement with a company or any of its subsidiaries in which a director of the company or of its holding company had, directly or indirectly, a material interest if—"

the value of each transaction or arrangement within subsection (1)(c) or (2)(c), as the case may may be, in which that director had, directly or indirectly, a material interest and which was made after the commencement of that relevant period with the company or any of its subsidiaries; and
the value of each such transaction or arrangement which was made before the the commencement of that period less the amount (if any) by which the liabilities of the person for whom the transaction or arrangement was made have been reduced;
did at any time during the relevant period exceed in the aggregate £1,000 or, if more, did not exceed £5,000 or one per cent. of the value of the net assets of the company preparing the accounts in question as at the end of the relevant period for those accounts, whichever is the less.".—[Mr. Eyre.]

Mr. Eyre: I beg to move amendment No. 159, in page 162, line 22, at end insert—
'51A. In section 64(4) (application of section 28 of the 1967 Act to section 64(3)) for the words "subsection (3)(b)" there shall be substituted the words "subsections (4A) and (4B)".'.
This is a technical amendment and is consequent upon the amendment to section 28 of the Companies Act 1967 being made to schedule 3.
Amendment agreed to.

Mr. Eyre: I beg to move amendment No. 160, in page 162, line 36, at end insert—
'54A. In section 72 (penalties for breach of sections 68 and 69 of the 1980 Act) for the words "or 69", in both places where they occur, there shall be substituted the words "69 or 70".'.
The amendment rectifies an omission from section 72 of the Companies Act 1980.
Amendment agreed to.

Schedule 4

REPEALS

Mr. Eyre: I beg to move amendment No. 161, in page 164, line 32, column 3, at end insert—
'In section 283(4), the words "and delivered" in each place where they occur.'.
This is a technical amendment and includes in schedule 4 the words that clause 96 deletes from section 283(4) of the 1948 Act.
Amendment agreed to.
Amendments made: No. 162, in page 164, line 37, column 3, at end insert—
'In Schedule 1, Regulation 10 of Table A.'.
No. 163, in page 164, line 37, column 3, at end add—
'In Schedule 1, in Regulation 88 of Table A and Article 38 of Table C, the words "or under section 28 of the Companies Act 1976".'.
No. 164, in page 165, line 5, column 3, at end insert—
'In section 29(1), the words from "This subsection applies" to the end.'.
No. 165, in page 165, line 13, column 3, leave out from 'of' to end of line 14 and insert—
'the 1948 Act, Regulation 88 of Table A and Article 38 of Table C in Schedule 1 to that Act and Schedule 14 to that Act.'.
No. 166, in page 165, line 32, column 3, leave out '18 and 19' and insert
'18, 19, 124, 125 and 200'.
Order for Third reading read.
[Queen's Consent and Prince of Wales's Consent signified.]
Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Jopling.]

Mr. Clinton Davis: We have almost reached the final stage in this saga—the Companies Bill 1981. I cannot remember when it began.
First, I thank the outside bodies which made massive contributions to improving the Bill—it certainly needed improvement—and assisted us in scrutinising the clauses, notably in Committee and on Report. I also thank in particular my hon. Friends the Members for Norwood (Mr. Fraser) and for Coventry, North-West (Mr. Robinson). They took a great deal of the burden from my shoulders. I also thank the Minister and his Minister of State for their great courtesy in these struggles. They have been helpful in a variety of ways. The Minister has added to his reputation as a kindly and generous man to whom we all


enjoy listening sometimes. I should also like to thank his officials, who at one time were my officials, because they have assisted him to assist us.
We voted against the Bill on Second Reading because we found, in particular, that the provision to abolish the Register of Business Names was, in our opinion and in the opinion of virtually everyone else, apart from the Minister and one or two Back Benchers, a regressive measure. We sought to take every possible step to dissuade the Minister from the destructive course that he has regrettably pursued.
In other respects, as a matter of principle, I think that the Government have sought to engage themselves in trying to deal with a number of prolific and difficult problems. The end product is regrettably a bewilderingly complex Bill. It will create great difficulties for those who advise professionally on these matters and for business men. The Minister says that there is no simple way out of this situation. The hon. Gentleman had a vivid phrase to describe these complexities. It was something along the lines that the Bill cannot be limpid, simple and brief. There are large tracts of the Bill which for many will be incomprehensible. That does not add to the value and the esteem in which the law will be held by many if my view is correct. Maybe, however, the Minister is right. Maybe it is impossible to grapple with these difficult problems without being as complex and sometimes as convoluted as the Bill.
Some brave attempts have been made to deal with a number of abuses and to rectify certain situations. The ability of a company to purchase its own shares subject to suitable qualifications is an advance. So, too, is the effort to deal with concert parties, even though the Minister did not initially wish to handle the matter and wanted to leave it to the self-regulatory bodies which, however, did not want the task. It is possible that the Opposition played some part in changing the Minister's mind. Notwithstanding the remarks I have made about the complexity of the Bill, it is an effort to grapple with a real problem that could have devastating effects on British businesses if not dealt with successfully. The Consolidated Gold Fields case revealed the dangers all too well.
I have complained from time to time about the inadequacies of our procedures for dealing with these matters. I shall not make that speech again. I wish simply to underline that when dealing with this type of legislation involving the sort of changes that are demanded in our business and industrial life and the sort of changes that workers are entitled to request, a method can surely be found that is far more rapid and far more flexible than that permitted by our present techniques in the Chamber, which are wholly antiquated. We have to devise a more sensible system that can deal with the changing demands of a modern industrial society. Some start to that effect has been made by embracing the idea that one can legislate by statutory instrument.
We should not go too far in that respect, because there would be a danger of the House being debased, but when we are dealing with this sort of legislation which involves technical changes, the use of statutory instruments could be invaluable, subject always, of course, to suitable safeguards. I welcome the speech of the hon. Member for

Tynemouth (Mr. Trotter), who said earlier that it would be useful if limitations of time did not impress themselves on us so much when we are considering these matters.
We have debated a massive number of amendments to the Bill. The Opposition are not guiltless, because we tabled some of our amendments late in the day. We had thought that it would be best to deal with them all at once and we were waiting to see whether the professional organisations wished us to table amendments, but perhaps they were satisfied with the consultations that have taken place.
However, it is grossly unsatisfactory that Government amendments and new clauses were put down at the last moment. That was not the fault of the Ministers or their officials. It was caused by the constraints of time.
It was wrong that we should have been driven along as we were because the Government had to get the Bill through Committee by a particular time and out of the House just before the end of the Session. There were many technical provisions and they could easily have been stood over to the next Session, as the hon. Member for Tynemouth suggested.
We have seen another demonstration that our procedures are ill-equipped to deal with Bills such as this. If we had a little more time we could avoid some of the gobbledegook that passes for legal requirements in so many statutes, and not least in the Bill.
The abolition of the Register of Business Names is a retrograde step. The changes on which the Minister has embarked may operate as a rogue's charter. Time will tell. I hope that he is right and I am wrong, but I do not believe that the matter was carefully thought out by the Government.
I do not know what my constituents would think if they knew that I was talking in the House about concert parties. I do not know what will happen at my reselection and whether I shall be asked about my attitude towards concert parties. It is an important matter, but I wish that he had a better name to describe the abuses that have taken place. The accountancy bodies still believe that the clauses are too complex.
My hon. Friend the Member for Norwood said in Committee that we should allow the company court a little more discretion. Perhaps we should rely more on civil remedies, because we have to be stringent when applying criminal sanctions and ensure that judges are able to exercise discretion more along the old equity lines. That would be a useful approach. It is certainly something which we should contemplate, because we are bogged down by extremely complex and possibly unenforceable procedures.
We included in the previous Companies Act insider dealing sections that are so complex and difficult to operate that I doubt whether we shall get any successful prosecutions. There are so many hurdles for the prosecution to surmount that I fear that those sections will be found to be unworkable.
All that the Minister can hope for is the creation of an atmosphere in which this abuse will not be perpetuated. However, it will go on. Insider dealing will go on, and it will go on unpunished, largely because there are no effective civil sanctions to deal with it, and the criminal sanctions cannot operate. The same, I fear, will happen with concert parties. I wish that there were more draconian steps, the kind of steps that we outlined previously. In my view, the Minister's contribution in this connection was


inadequate. We need more draconian steps to destroy the effects of illegal action taken by persons abroad. Time will tell whether the Government have taken the proper and adequate steps.
I do not believe that the legislation covers satisfactorily the case where two or more people act together by procuring a third person to buy shares but do not inform him of their agreement. Apparently, the Department has considered the matter but is not persuaded that it accords with the practical aspects of planned share purchases. What happens if the Department is wrong? What happens if considerable damage is done? How quickly can the defects be remedied?
Another important defect is that although companies undertaking their own investigation into the ownership of shares have extended powers under the Bill, I doubt very much whether those powers would enable them to look to third parties to carry out the investigations that they require. So our view is that the Bill has many deficiencies.
In conclusion, not only must we look to the House of Commons to try to remedy abuses in the way that the Bill seeks to do, and improve upon that but we must try to change the whole self-regulatory system that is applied at present in this country. I shall not go into the matter, beyond saying that the self-regulatory system has been shown to have failed in case after case in our recent history—not only the Dowgate case, but many others like it. We need our own form of Securities and Exchange Commission, based upon our own experiences and requirements. I believe that a Labour Government should feel impelled to do that and show that the whole miserable and flimsy structure that we have in this country for dealing with abuse must be rectified. I am sure that that is right. Having said that, we do not propose to vote against the Bill tonight.

Mr. Bill Walker: I wish to speak to a new schedule that I tabled, but which regrettably we were unable to debate. It refers to public companies.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. I have not had the advantage of being present throughout the Bill's proceedings. Is this in the Bill? If it is, it is in order.

Mr. Walker: I simply want to place on record my thanks to the Minister for the consideration that he gave me when I raised the matter. It is unfortunate that we were alerted to the difficulties so late. I refer to the description of a public company in the Companies Act 1980. Public companies are required to change their name and to delete the word "Limited" as the concluding word of their name and substitute the words "public limited company", or the abbreviation PLC.
That requirement gives rise to considerable administrative expense, particularly in re-registering patents and trade marks, where registration fees become payable. Difficulties may also arise from the name of the goods and products in existence before the change of name.
However, my main concern is for the companies which have many places of business abroad, or that have trade marks and patents throughout the world. My new schedule was designed to provide the companies with the opportunity of adding after their existing name the description "public limited company".

In my judgment that would have been sufficient to comply with the directive, which would mean straight descriptions rather than changed names. A person who purchases a product or commodity is not usually worried about whether the supplier is a public or a private company. The same applies to names embossed on plant and machinery.
Many of our major firms with extensive activity abroad might be faced with costs involved in the re-registration of patents and trade marks. The fees will have to be paid overseas to patent offices and foreign Governments. That could involve a sterling outflow of between £10 million and £20 million and could create a problem in terms of cash flow out of the United Kingdom. In addition it could place a financial burden upon companies whose funds are already savagely and sorely affected by inflation and world depression. I look to the Government either to introduce legislation soon or to do what they can to mitigate the effects.
I have no doubt that in Europe the effects will not be so savage. My concern is for what might happen in other parts of the world, particularly the Third world where companies will be required to re-register their patents as they come up for renewal. There will be questions about the change of name. The problems will not be easily resolved unless the Government can find ways to smooth the path.

Mr. Eyre: I am obliged to Opposition Members for their personal courtesy during the long passage of the Bill and for providing an opportunity to reflect on the Bill as a whole. I commend it to the House.
The last two years have been remarkably productive for company law. The hon. Member for Hackney, Central (Mr. Davis) and I spent much effort on the subject in that time. I am conscious that two successive Bills of the size and range of those that we have considered have tested to the full, and at times strained, the capacity of the House and people outside to give the legislative proposals the fullest scrutiny. That is Parliament's function. The Bills will be our battle honours.
All hon. Members will wish to pay tribute to the people outside the House who interest themselves in company law. I refer to the law societies, accountancy bodies, the CBI, other representative organisations and to the many individuals who have taken a keen interest in particular aspects of our work. The hon. Member for Hackney, Central paid tribute to them. I am glad that he did. We know from our experience how deserved that tribute is. Such input is indispensable. It ensures that we are not allowed to forget or ignore the practical impact of our measures. The expertise and experience available are formidable. I like to think that my colleagues and I and the Department are open and responsive in our approach to company law. Of particular benefit to me on this Bill has been the advice of the advisory panel on company law which was established last year, and of Professor Gower, who was appointed in 1979 as the Department's research adviser on company law.
A number of references were made yesterday to the prospect of an annual Companies Bill. We have no intention of introducing another such Bill in the immediate future. The hon. Member for Swansea, East (Mr. Anderson) referred to a pipeline of legislation in Brussels. The obligation to implement the second and fourth


directives has been among the factors, but not the sole factor, in triggering off both the previous Bill and this measure. A number of Community instruments are at various stages of consideration in Brussels. Community legislation is a new factor which we have to take into account.
We have made our views on the company law harmonisation programme clear. We believe that it should concentrate on instruments that fulfil a real and practical need for harmonisation and that the Community must temper its ambitions to the capacity of the national legislatures and administrations to cope with new and additional requirements. There are signs that that view is meeting with increasing sympathy in the Community.
The hon. Member for Hackney, Central referred to the broader question whether our parliamentary procedures were capable of providing adequate scrutiny of complex and technical Bills. That raised far wider issues than it would be appropriate for me to discuss tonight. The hon. Gentleman's sentiments will have struck a chord with hon. Members who have been closely involved in both this and the previous Bill. Perhaps they will provide food for thought for the House as a whole. I thank the hon. Gentleman for the efficient and considerate manner in which he has conducted business during our protracted proceedings. I also thank the hon. Members for Norwood (Mr. Fraser) and Coventry, North-West (Mr. Robinson) for their useful contributions.
My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) raised the problems of patents, trade markings and so on, resulting from the requirement of the 1980 Act that old public companies should change their names to include "public limited company" if they wished to remain public companies. That matter was raised in Committee by my hon. Friend the Member for Dorset, North (Mr. Baker). I assure the House that the Government are sensitive to the possible additional burden on industry. That problem has been identified only during the past few months. It would not have been appropriate to make the radical change to the basis of re-registration that was set out in the 1980 Act in the middle of the transitional period for the new arrangements, especially as so many companies had already acted on that basis.
The Government are taking measures that we are advised will resolve any problems in the area mentioned by my hon. Friend the Member for Perth and East Perthshire. As to potential difficulties with certain overseas patent offices, we cannot legislate to ensure that they deal sympathetically with those matters. We shall use our influence both in the Community and on a national basis to seek to minimise the problems for British industry and commerce. I hope that that will provide some reassurance for my hon. Friend.
The hon. Member for Hackney, Central raised the question of insider dealing. He will be relieved to know that a conviction has been secured already. I shall be glad to let him have further details of that if he wishes.
The immediate future does not hold the prospect of further primary legislation. However, in the near, if not


the immediate future—and it is of tremendous importance as it arises from the Bill—there is the prospect of consolidation. I am pleased to say that under clause 103 the process of consolidation is well under way. Both the 1980 Act and the Bill make consolidation imperative, and that is recognised by the Government. To that end, an experienced former parliamentary counsel was appointed last year to undertake what is by now a Herculean labour. Clause 103 introduces an important new provision under which amendments to the Acts may be made by Order in Council if the Law Commission recommends that they are desirable for the achievement of a satisfactory consolidation. My Department will be consulting shortly on whether the consolidation should take the form of one mammoth Act or, for better management, several Acts, and, if the latter, how the Acts should be divided. I saw the eyes of the hon. Member for Coventry, North-West light up at the prospect of serving on the Committees that will deal with those measures.
In due course we shall also be consulting on the contents of the consolidation, on which I understand that the draftsman is making excellent progress. All in all I can now offer a much more concrete proposal of consolidation actually taking place. It is, of course, a mammoth exercise. I am advised that it is the largest consolidation ever. However, I share the wish of all concerned with company law that it should be achieved as soon as possible and that this will be a major priority for the future.
We have had good debates on the Bill. We have had our differences on some of the provisions in the Bill as well as on what is not in it. However, for the most part—as happily remains characteristic of Companies Bills—there is a large measure of agreement on both sides of the House on the objectives of different parts of the Bill. It will come as no surprise to the House if I say that, in my view, it is a good Bill. What I like about it is the practical contribution that it will make in its own way to the development of commerce and industry in this country and to the restraint of malpractices which have adversely affected industry and commerce.
I greatly look forward to the enactment, very shortly, of a measure that will enable small and medium-sized companies to take advantage of reduced accounting disclosure requirements, streamline the registration of company names, replace an inadequate system for the registration of business names with a more direct self-policing system of obligations, enable companies to purchase their own shares, remove undue commercial impediments imposed by sections 54 and 56 of the 1948 Act, strengthen the law on the disclosure of interests on company investigations and with regard to the proper practice of directors and at the same time pave the way to the much-needed consolidation of the Companies Acts. That is a notable list of virtues and they can reasonably and properly be claimed on behalf of the Bill. I commend it to the House.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.

Grant-Aided Colleges (Scotland)

Mr. Martin J. O'Neill: I beg to move, 
That a humble Address be presented to Her Majesty, praying that the Grant-Aided Colleges (Compensation) (Scotland) Amendment Regulations 1981 (S.I., 1981, No. 1054), dated 22nd July 1981, a copy of which was laid before this House on 24th July, be annulled.
In moving this prayer against the order the Opposition are aware that it could well be the first of many such orders. The purpose of the order is to start dismantling the Crombie code. The code has been in operation since 1948 and was at first the basis for the National Assistance (Compensation) Regulation. Since then, whenever there has been a statutory reorganisation of public services, the Crombie code has provided the basis for recompense in the form of redundancy payments for staff who have been affected.
The decision to end the code was taken by the Government and transmitted to the TUC in September last year. In the initial stages, when the code was being established, the TUC was involved in drawing it up. Given the nature of the code, the trade unions have been involved in every stage in its expansion to cover a whole range of public services. To say that the trade union movement was surprised by such a unilateral declaration by the Minister would be an understatement. The then Minister for the Civil Service, the right hon. Member for Southend, West (Mr. Channon), spelt out in his declaration what has become the Government's line, namely, that the Crombie code contains too many anomalies. Therefore, Ministers decided that detailed negotiations should be held to determine the basis of compensation most appropriate for the particular groups of staff concerned. However, there was to be no major departure from previous practice. The objective was that representatives of staff and management should arrive at a mutually agreeable term of compensation.
This is all a matter of record and was minuted at a meeting with the TUC on 19 November 1980. When the unions offered to participate in an exercise to eliminate the anomalies of the Crombie code on the basis of the adoption of the best practice that was provided, the Minister rejected it out of hand.
In the initial stages of Crombie the code was a forerunner of the redundancy schemes that are now current. There has been a constant recognition of governmental responsibility towards staff who are affected by statutory reorganisation. Public servants who are no longer required by the Government because of legislative decisions are often unlikely to obtain alternative employment in their own specialties. It has been recognised that they need special protection. In many instances the recognition has gone beyond that. It has become a point of reference to provide long-term protection for staff. It has provided a mechanism whereby lump-sum payments are arrived at in the determination of redundancy payments.
There are many organisations which do not fall technically within the statutory obligations of the Government but which are affected by legislation. Very often these organisations, especially when trade unions have not been involved, have been able to use the Crombie code as a guideline. The Government have failed so far to

offer any of the groups that I have mentioned the financial recompense that is offered by the Crombie code. For example, in the regulations that are the subject of the Prayer, the Crombie code would take effect for staff over the age of 40 years. The regulations provide that only staff aged over 50 years will be eligible for remuneration under the redundancy scheme suggested by the Minister.
Over the past four or five years there have been redundancies amounting to 30 per cent. overall in college of education staffing. It is relevant to refer to the former colleges of Callendar Park and Hamilton, which are being absorbed into Moray House and Jordanhill colleges. The staff who have come through the Callendar Park and Hamilton experience may be made redundant yet be subject to inferior redundancy provisions to those which were enjoyed by their former colleagues. The irony is that those who fought to protect the right to work and who have more years of service will get a poorer deal than their former colleagues.
The regulations go beyond college of education staff and cover all the staff of grant-aided colleges in Scotland. These colleges embrace central institutions such as Robert Gordon's institute of technology, the Queen Margaret college in Edinburgh and the Paisley technical college. None of these colleges has so far been dramatically affected by staffing cuts. However, if the warnings that are given in today's copy of The Guardian are to be heeded, their English counterparts, to the extent that they are counterparts—I concede that there are certain differences—such as polytechnics may be assumed to be the next targets for cuts on the Government's hit list. I cannot see the gutless Scottish Office resisting a call for further savings in further education when it has been so assiduous in implementing Government cutbacks in other areas of education.
The position of many of the academic staff who will be affected by the dismantling of the Crombie code may be compared with the staff of colleges of education and university lecturers.
The benefits offered under the Crombie code are better in many respects than those offered to school teachers and the differential can be seen as a recognition of the inability of colleges to offer what has hitherto been the province of the universities, namely, security of tenure for life, which has been one of the cornerstones of academic freedom in our universities.
If the individuals with whom we are concerned are roughly similar to university staff in many respects, it is obvious that we are considering nothing less than a blatant attempt to undermine potential claims by university staff who could be made redundant by the University Grants Committee cuts.
It seems ridiculous that at a time of widespread unemployment, when the opportunities for alternative employment in education are even more limited than they have been for many years, the Secretary of State should consider even the possibility of worsening the severance conditions of staff.
The Government have a responsibility to their staff and should be trying to set an example as the best sort of employer. But in every case the new provisions will be worse than those that have prevailed before.
Why have the Government taken this action? Is it to save money? If so, what is the size of the savings? Have any costings been done? Do the Government know how many anomalies will be removed by the dismantling of the


Crombie code? If we are to have a piecemeal approach to the replacement of the Crombie code by other systems of redundancy payment, there is no guarantee that there will be any consistency in the new system.
The fundamental objection that the Minister has made in correspondence with various organisations is that there are anomalies in the Crombie code. When the TUC met the Civil Service Department last year at the outset of the consideration of the problem it said that an attempt should be made to work out a scheme that would iron out the anomalies. The Minister rejected that, and from what I have read of his replies to interested bodies and hon. Members, it is clear that he is not interested in trying to work out an improvement in what is admittedly an unsatisfactory situation in some respects, but one which the trade union movement is willing to work to improve.
Not the TUC, any organisation representing staff, whether lecturers in colleges of education, lecturers in Scottish central institutions or higher academic staff, who have not been well known for militancy in the past, the Educational Institute of Scotland or NALGO have had any satisfactory answers to their questions. Perhaps the Minister will tell us what is the rationale behind the dismantling of the Crombie code.

Mr. Robin F. Cook: My hon. Friend has mentioned a number of organisations which have complained about the order. He will be aware that the national joint committee governing conditions of staff in colleges of education is among the bodies that have protested, but is he aware that the committee was left to read of the proposals in the press, even though it had met the Minister and his officials only a few days before the order was made?
Does not that attitude to the staff display a contempt for those who are most affected by the order and reveal the cynicism that the Government have shown in bringing the order before the House?

Mr. O'Neill: I could not agree more. In the short time I have been an hon. Member it has been clear that the Minister's handling of Scottish education matters has resulted in those most affected by cuts or staff reductions always being the last to hear about them. Indeed, they usually hear of them in a way that is almost insulting to the House, because such matters are almost invariably pushed through at the end of a Session, or, as in the case of the colleges of education closures, at a time when it is difficult for the Minister to be pursued and questioned.
The Opposition believe that the Minister must answer the points that I have put to him concerning why the Crombie code is being dismantled, why the trade union's offer to smooth out the anomalies has been refused and, if there are any savings, how much will they amount to. If the Minister is unable to answer, I must ask my right hon. and hon. Friends to join me in the Lobby to oppose the regulations.

Mr. George Robertson: This evening we are debating what can only be called a fairly obscure and mystifyingly titled document—"The Grant-Aided Colleges (Compensation) (Scotland) Amendment Regulations 1981." However, those regulations again display this Government's same sharp practice, the same

parliamentary tricks and the same shabby, short-sighted and insensitive attitude to educational training and those who work in it that has characterised their handling of the whole issue from their antics in 1977 to the present day.
Those who work in the further education sector should look carefully at this miserable episode and the way in which the Government have gone about the shady dealings with Scottish colleges of education. They should learn the sinister lesson from that.
Today the colleges of education in Scotland get the hatchet, then the scalpel and now the brush-off. Tomorrow the vandals will move on to the rest of the educational system. The regulations are not specifically about the closure of Hamilton college of education in my constituency. They are an act of calculated, cynical educational destruction and an act that rightly gained no support in the whole Scottish community. Of course, it arises out of the Government's so-called miserable "success" in that chapter of Scottish political history. This little postscript is just one more addition to the continued agony and uncertainty of the staff of the destroyed Hamilton college of education.
I shall make one specific point about the conditions that apply to those who are affected by the closure of Hamilton college of education as well as those in the other colleges of education who are also affected by the regulations and by the Government's policy in this area.
The Scottish education department sent a letter to a variety of people involved in the so-called consultation exercise, including Mr. Robin Lobban, the chairman of the Association of Lecturers in Colleges of Education in Scotland. This standard letter was entitled "Dear Sir or Madam". With the perception that can come only from years in the Scottish Office, it had managed at least to score out "or Madam." before the letter was sent. The letter said:
College staff who suffer loss of employment or loss or diminution of emoluments, attributable to the operation of the Teachers Colleges of Education (Scotland) Regulations 1981, which were made on 14 July and laid before Parliament on 16 July, and which provide for the dissolution of four colleges of education, will still be entitled to be considered for payment of Crombie compensation.
Any sensible and objective reader of those words issued in the name of the Minister would believe that that was a categorical assurance that those who are affected by the Minister's educational vandalism in the four colleges of education would at the very least have the protection of the Crombie system, the demise of which we are seeing thanks to the silent majority who are so glaringly absent from the Government Benches tonight.

Mr. George Foulkes: Where is the non. Member for Aberdeenshire, East (Mr. McQuarrie)?

Mr. Robertson: I am not surprised that my colleagues are drawing attention to the scanty attendance on the Conservative Benches. In the grim days of 1977, when the Conservatives made much of Scottish education in their propaganda, the Conservative Benches were crowded for any debate which had anything to do with Scotland's colleges of education. It is a symptom of the cynicism and the splits in the Conservative party that we see so few Conservative Members here this evening to support the Minister in this last act of betrayal of Scottish education.
Referring specifically to Hamilton and the other doomed colleges, the question that arises from the letter to which I have just referred is: what will happen to


members of staff who, in the next few weeks, accept the blandishments of the new colleges of education to which they are transferring for employment, and sign the documents that are being put before them, offering them new contractual arrangements to work in those colleges? Will their signature on those documents signify that they are accepting a change in their conditions of employment that would mean that their rights, as mentioned in the Minister's letter, are to be arbitrarily and needlessly withdrawn?
The Minister must answer those questions this evening, for time after time and in debate after debate on this subject he has given assurances about the conditions that apply to people who worked in the colleges that he aimed to remove from the Scottish college system. Yet it is now clear that some of the staff, who have stayed loyally within the system, are now being put into a "Catch 22" position, having either to accept the Crombie compensation and leave the system now or to sign these documents, the need for which was never advertised before and the need for which was specifically excluded by the conditions set out in the letter from the Scottish education department. If the lecturers sign these new contracts, will they be covered by the assurance that was given on the Minister's behalf in the letter sent to Mr. Robin Lobban on 24 July? The Minister must answer that question this evening, because it matters to a very large number of people in the doomed colleges.
What is at issue this evening is not just the matter of compensation for redundancy in the public sector. As my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. O'Neill) has said, we are seeing here, disguised by an obscure title, the thin end of a very thick wedge of compensation for large numbers of people in the public sector who will be the next candidates for the Tory executioners.
How will the Minister, with his responsibility for the Scottish education system, achieve in the future a rundown in the numbers of staff in colleges of education, or in any other part of the public sector, with the same degree of cooperation that he has previously enjoyed, if he now undermines and demolishes the whole basis of cooperation that has been enjoyed before? The Government seem to have rushed into this decision in a bid to satisfy the demand of the public sector borrowing requirement, and with no thought for the future structure of colleges of education in Scotland or any other part of the educational and public sector to which the Government might look in the future.
There are a large number of areas of public concern—[Interruption.] Although we now welcome to our midst two former Tory Ministers, whose demise from the Government was perhaps related to their rebellious support for policies against those of the Government—[Interruption.] On this side of the House, it can sometimes be said that we allow people to die before we bury them. We welcome them to this important debate.
This is an important subject. For those affected by the Government's policy in this sphere, the questions that I have asked deserve serious answers from the Minister today.
The whole sorry catalogue illustrates the entirely callous approach of the Government to the human aspect of this. It illustrates yet again the twisted way in which they go about things in the new, harsh Tory world being paraded before us. When the time comes for the

Government to go before the electorate, the message from the people of Scotland, who have seen this whole sad spectacle before, will be swift, sure and definite.

Mr. Gordon Wilson: The adjectives that have just been used and the speeches that we have heard aptly describe the background to this affair.
I received a letter from Ms. Mollie Abbott, chairman of the Association of Higher Academic Staff in Colleges of Education in Scotland, dated 7 August. She said:
To have given notice now for a change consequent upon the 1982 intake could not be taken as disreputable but to do it at this stage in relation to the 1981 intake is incredibly underhand and politically inept.
It is interesting to note the language deployed by those who have been in these higher institutions when they consider the actions taken by Government over a period of years.
In a written answer on 6 August 1980, the Secretary of State himself expressed the belief that
we should be putting increasing emphasis on the quality of the teaching force
and proposed
to examine ways of improving the standards of pre-service training
and
further development of in-service training."—[Official Report, 6 August 1980; Vol. 990, c. 88.]
In the paper "Future of the College Education System in Scotland" he also made the point that the internal organisation of colleges of education should be flexible and that links among the colleges and between the colleges and other tertiary institutions should be strengthened. He also indicated that the Government were seeking a reduction in capacity in certain colleges.
We know what has happened since then. Throughout the changes that the Government have made their actions have been characterised by promises about consultation which have not been kept. The staff of these institutions may have had a strong complaint about the way in which the colleges of education were being treated, but even more reprehensible has been the manner in which the Government have sought to make the changes.
Again, on 27 July 1981, in relation to the proposals now before us, Thomas Rae, principal of Callendar Park, complained about the lack of consultation over the closures, which were announced on the second to last day of Parliament and after the academic holidays had begun. Now the Minister has again shown insensitivity and tactlessness in dealing with the colleges. Throughout the period of college contraction, the principle of "Crombie compensation" was accepted. There was no opportunity then for parliamentary discussion, and because it has been forced upon them, only with difficulty, by the Opposition, these matters have had to be argued out in Committee and on the Floor of the House. It is not so much the abolition of the Crombie code which has annoyed many of the people concerned as the lack of consultation and the heavy-handedness involved.
On 31 July, the Joint Committee of Colleges of Education in Scotland expressed "the gravest concern" over the abolition of the regulations. It urged the Secretary of State to enter into discussions about the code and, pending discussion, to allow the existing arrangements for compensation under the Crombie code to apply for the session 1981–82, as he had already set the quota for student intake on which that staffing entitlement was based. 


As has been indicated in previous speeches, considerable anger has been expressed by those employed in the colleges about the cancellation of the code. It came as a complete shock to them. They were given absolutely no indication that such a drastic change was imminent. Governor Members were convinced of two things: first, that the Crombie regulations would continue to apply for 1981–82 and reductions in staffing levels still to be made could be obtained with relative ease and efficiency with the effect of the compensation provisions; and, secondly, that the financial saving which would result from the cancellation of the code would be minimal and would be more than offset by the deterioration of management-staff relationships.
So far, those people and the House have been given no reasonable excuse why the decision was taken with such suddenness and secrecy. The Association of Lecturers in Colleges of Education in Scotland protested that no notice had been given to college authorities or to the appropriate unions or professional organisations. It further points out that the reorganisation of the college system has been operating smoothly, including the rundown of staff, under the Crombie system and sees no need whatever to change the arrangements.
There are at least three specific points of criticism arising from the decision that has been taken by the Minister. The first is the strange way in which the decision was taken, including its timing and the lack of consultation involved. Secondly, there is the financial difficulty that might be caused to those under 50 who might be placed in an invidious situation as a result of this sudden change without proper consultation or realisation of what was in effect.
The third criticism, which is equally important, relates to the ability of the colleges to introduce further changes which the Government might require of them. The Government, particularly the Scottish education department, must bear this in mind. If they unilaterally change arrangements that have been settled for a period of years without consultation, they will destroy the prospects of future co-operation between those involved in the administration of teaching within the colleges of higher education. They may not be able to get the changes they want because they will have destroyed the basis of trust and removed the possibility of co-operation which might have emerged as a consequence.
These regulations represent crass insensitivity. They are no more than a bureaucratic juggernaut which the Minister and his associates in the SED seem to have unleashed on this one sector of higher education. Based on the examples given to us over the past two years, we wonder and fear what they may now do to the rest of the Scottish higher education system.

Mr. John Maxton: I declare an interest in the regulations. In 1977, when the parent regulations were drawn up, I was the national chairman of the Association of Lecturers in Colleges of Education in Scotland. Before the regulations were put to the House, I took part in negotiations to ensure that they protected the best interests of my members.
At that time, of course, my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan) was

responsible for the proposals affecting the colleges of education. I did not always agree with what he was proposing, but at least my right hon. Friend and my hon. Friend the Member for Glasgow, Queen's Park (Mr. McElhone) were always prepared to listen and consult us on the issues. If they felt that we had made a case, they were prepared to change their mind and take a different view. My right hon. Friend did so, and one of the results was the so-called Crombie regulations, which have allowed for a smooth rundown in the numbers of staff in colleges of education since 1977.
There was a smooth rundown following that consultation—at least until the present Minister came into office. In July last year, without any consultation or thought, he decided to butcher two colleges and to merge two more. Once again, on this issue, we have a total lack of consultation.
I was on the committees and know that there is a clear procedure in the colleges of education system. The employee organisations are represented on the committees almost entirely by the Association of Lecturers in Colleges of Education in Scotland. Ministers will tell us that the employers are the governing boards. They are not. If we told the Government that they were the real employers in the colleges of education, they would throw up their hands in horror and state that it was the governing boards.
However, the amendment to the regulations is essentially retrospective to 14 August, and the employers were not consulted. The Minister did not even call a meeting with the chairmen of the boards of governors. He is represented on every committee in the colleges—on the conditions of services committee by advisers and on the salaries committee by members of the management side—but he did not even send his representatives to put the proposal to those properly constituted committees to allow them to discuss the regulations and the change. He made no effort to consult either the employers or employees. He should at least have ensured that the changes were made in a way that benefited the whole system.
I was about to say that what the Minister did created further distrust, but it is no longer possible to do that. He is utterly discredited in education circles in Scotland. The Minister was high on my list of those who I believed should go in the Prime Minister's reorganisation. He is incompetent and totally distrusted in every education circle in Scotland.
Perhaps the Secretary of State after my words is shaking in his boots. No one believes the Under-Secretary of State any longer or trusts his word. They know that he will not consult even though he has said that he will. If he says that he will do one thing he does another. The hon. Members for Edinburgh, South (Mr. Ancram) and for South Angus (Mr. Fraser) are new, young and able Members. They must wonder how much longer they must remain on the Back Benches and see that incompetent on the Front Bench. Even the hon. Member for Perth and East Perthshire (Mr. Walker) must sometimes feel that, and by God, if that is so, it really is something. That is the situation we are in.
The retrospective nature of the legislation is serious. In May the Secretary of State issued figures on the number of students that each college would take in October. Following discussion and consultation, he wrote to each



college. I have a letter sent to Professor Baillie Ruthven, the then principal of Moray House college of education, signed by the Minister's civil servant. It states:
After carefully considering the comments which he has received on his proposals from all the governing bodies, the Secretary of State has decided that he would not be justified in making any alterations to the college quotas which were set out in his statement of 30 April.
To my mind, that is a clear statement that there would be no change and that the colleges have no alternative but to take the number of students that the Secretary of State has stated. Then this instrument comes along. What lecturers want to know is this. If a college has surplus staff as a result of the decrease in the number of students entering in October this year and has to declare redundancies, will they be covered by the compensation regulations, or will they be overtaken by the regulations and will not receive compensation? The regulations come into effect on 14 August. When that question was put, the answer from the Minister's advisers was that they would not be covered because the Secretary of State has issued no directive on the numbers in terms of laying it before the House. Although he has told the colleges that they must take a certain number of students, he will withdraw compensation from anyone who may be declared redundant as a result of the letter.
A slightly different tone enters into later letters. I have a letter from the Minister which gives a slightly different position. The Minister says:
It is true that colleges have had an advance indication of the levels of student intakes for the 1981–82 academic session which are likely to be prescribed.
That seems to adopt a very different tone from the letter received by the principals about the numbers they would have to take.
If lecturers are declared redundant and do not receive compensation based on student figures issued by the Secretary of State in April and are refused compensation on the basis of regulations coming into force on 14 August, it will be a despicable act and one of which the Minister should be ashamed. I hope that even at this late stage he will assure the House that anyone affected by the student figures in October this year issued on the basis of the Secretary of State's figures in April will be covered by the former regulations and will not be overtaken by the new regulations. If the Minister fails to give such an assurance, he will once again be proved untrustworthy.
This is not just a debate about colleges of education in Scotland or grant-aided colleges in Scotland. This is the first Government attack on all public employees, who should be made aware of the fact. Only yesterday the Government announced legislation to be introduced in the coming Session to sell off a large number of public organisations. What will happen to those employees? I can guarantee they will not get Crombie. More public employers will find that compensation, traditional since 1947 for public employees, will cease. The Government will find that public employees who voted for them in the last general election will not be voting for them next time. They will be turned out because of their underhand action.

Sir Hector Monro: I do not intend to follow the colourful language and criticism of Opposition Members. This is, however, a serious issue. All hon. Members representing Scottish constituencies will have received a great number of letters and telegrams. It is right

that hon. Members should pose questions. I had hoped that my hon. Friend the Minister would speak earlier. He might have covered some of the questions that I wished to put. I am sure that he will answer them in his winding-up speech. I wish to speak particularly on behalf of those at Craigie college which services my constituency and Dunfermline from the PE point of view. I also have, like many hon. Members, letters from other colleges as well.
How many people does my hon. Friend the Under-Secretary expect to be affected by these regulations? What difference will it make in financial terms to those who will be affected?
As my hon. Friend knows, I wrote to him in August, subsequent to the letter that I received from Mollie Abbott, which has already been mentioned. In reply, on 3 September, my hon. Friend said:
College staff who are not eligible for Crombie compensation in future will qualify for statutory redundancy payments under the terms of the Employment Protection (Consolidation) Act 1978.
Will my hon. Friend give an indication of the financial difference that there would be between the Crombie code and the 1978 Act? I hope that he will also explain how many people will be affected. I suspect that he will be able to say that relatively few will be affected by the regulations.
I shall listen to my hon. Friend's remarks with keen anticipation. I hope that he will be able to allay the fears about lack of consultation which run through a number of the letters. I am sure that he will be able to convince the House that he has given those involved adequate notice and has discussed this matter in detail with all concerned. I know that he will not have embarked upon these regulations without very sound reasons. We shall all listen with care to his winding-up speech. I particularly want him to allay the fears that have been deployed in all the letters. I hope that he will be able to show that the regulations are not only fair but are in the best interests of all concerned.

Mr. Dennis Canavan: What we are seeing tonight is yet another disgraceful chapter in the sorry saga of Scottish colleges of education. The main author of it all is the Minister sitting on the Government Front Bench, the Minister responsible for education in Scotland, who, ironically, is also the Minister responsible for industry in Scotland. This is one of the worst examples of industrial relations that we have ever seen on the part of anyone called a Government Minister.
Having attacked and, in some cases, destroyed the job security of many people who have been prepared to dedicate their whole life's service to education, the Minister is not content with merely doing that but is now attacking their entitlement to redundancy benefit by means of these mean and petty regulations.
It is significant that so far only one Back-Bench Tory has contributed to the debate; and even that contribution did not seem to be a very wholehearted defence of what the Minister is trying to do. Perhaps that is an indication of why the hon. Member for Dumfries (Sir H. Monro) is now a good knight rather than the Minister responsible for sport.

Mr. Foulkes: Does my hon. Friend agree that what we heard from the hon. Member for Dumfries (Sir H. Monro) was a coded message, and that what he was actually saying was that the Minister has botched the whole thing?

Mr. Canavan: Yes, I think that that is so. The former Minister responsible for sport, the hon. Member for Dumfries, would possibly have been even more vociferous in his opposition were he not, perhaps, afraid that the Queen might change her mind between now and the dubbing ceremony.
I notice, too, that no members of the Liberal Party or the SDP are either here or participating in the debate. That may have something to do with the fact that Shirley Williams is their self-appointed spokesman on education. When she was Secretary of State for Education and Science she had the worst record of any Secretary of State for Education and Science, worse even than that of the present Prime Minister. Shirley Williams will go down in the history of British education as having closed down more colleges of education than any previous Secretary of State or any Secretary of State since. So much for the Liberal and SDP interest in education, Scottish or otherwise.
I come back to this mean and petty measure. Its timing is particularly inept, although perhaps from the Government's point of view it may be apt because, as usual, just as on previous occasions when we were discussing Scottish colleges of education, the Tories attempted to sneak it through a few days before the parliamentary recess in the hope that Opposition Members would not see it and be unable to oppose it by means of this prayer. It seems to be a favourite tactic of the Government to try to push things through secretly at the fag end of parliamentary Sessions. I congratulate the Opposition Front Bench on having the nous to see what was going on and on bringing forward this Prayer in an attempt not merely to voice our opinion against it but to vote against it.
It seems to me that what lay behind the Government's timing was an attempt to push through the measure before the official direction on student intake for the current academic year, 1981–82, in a deliberate attempt to exclude from the Crombie code some of those who might be affected by it. It seems that it has been normal practice and the practice has continued this year for letters about the student intake numbers to be sent out in June.
Following representations from constituents and others, I wrote to the Minister at least twice in August about what I considered at the time to be attempted sharp practice. I received a reply dated 3 September, and it was signed by the Minister. I wrote again on 18 September, enclosing a copy of a letter from Robin Lobban, the chairman of ALCES. I told the Minister that I was very dissatisfied with his previous replies and that I expected a better reply next time. All that I got was an insulting reply from the Minister. It was virtually the same regurgitated reply that I had already had. Moreover, it was not even addressed to me. It was a copy of the reply to Dr. Lobban. Enclosed was a two-paragraph letter from the Minister to me saying at the end:
I am afraid that I do not understand your reference to an earlier reply".
There is something wrong at the Scottish Office, and it is about time that the Minister sorted things out or sorted out the Civil Service. My secretary can keep files on letters from the Scottish Office, although the Scottish Office apparently denies that they exist. I have here copies which I can show the Minister of the reply to the letters that I wrote to the Scottish Office in August. Yet the Minister signs letters denying that he received any representations

from me, or at least denying that he had made an earlier reply. While on the matter, may I say that I strongly resent the Minister addressing me "Dear Dennis" and signing his letter "Yours ever, Alex". He has never been mine. If he ever was mine, I would certainly disown him. Therefore, if the Minister is going to write to me such an offhand and inaccurate letter, I would appreciate it if he would do so in more formal terms.
I am not the only person to criticise the Minister's behaviour. If I were to relate the contents—without quoting—of some of the letters in my possession I would probably be thrown out of the Chamber. I have a letter from the former principal of Callendar Park college, Mr. Tom Rae. He is now the assistant principal of Moray House college of education. He wrote:
Apart from the injustice of the action in removing Crombie compensation in the middle of drastic alterations to the college staffing structure, the way in which it was done was dishonest and dishonourable.
Tom Rae is not alone in his castigations of the Minister. He is accompanied by Mollie Abbott, who is not only the principal of Dunfermline college of education but also chairman of the Association of Higher Academic Staff in Colleges of Education in Scotland. She said:
To have given notice now for a change consequent upon the 1982 intake could not be taken as disreputable but to do it at this stage in relation to the 1981 intake is incredibly underhand and politically inept…This is not the conduct one should have reason to expect from any Minister of Her Majesty's Government.
Mollie Abbott is the principal of Dunfermline college of education. I remember standing shoulder to shoulder with the Minister three or four years ago, when he was an ordinary hon. Member for Edinburgh, North. At that time the future of the college was being questioned. The hon. Gentleman and I turned up at a meeting and made many promises, both publicly and privately, to Mollie Abbott to the effect that we would fight to save not only Dunfermline college of education but the whole 10-college system. We promised to fight to try to protect the job security of the staff and to protect redundancy entitlements. Once again, the Minister seeks to go back on his word.
At that meeting the Minister was not the only Tory present. The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton), who has the college in his constituency, was also there. He fought courageously and vociferously to save Dunfermline college of education. I am sorry that he is not in the Chamber, because he and I had the pleasure of making a return visit to Dunfermline college of education during the recess. Believe it or not, we shared the same platform. The occasion was the annual general meeting of the Scottish Spina Bifida Association. I do not know whether it was coincidence, but a few days later I picked up the paper and discovered that the hon. Member for Edinburgh, West had been sacked. He did not even get a knighthood to go with his title.
The wrong Minister was sacked. The hon. Member for Edinburgh, North should have been sacked. By his behaviour on this and many other aspects of Scottish education and industry he has proven himself the worst and most inept member of a dishonest, deceitful and discredited Government. The only honourable course open to him is to resign.

Mr. David Lambie: I must intervene briefly to speak in support of my constituents


who work in Craigie college of education and who will be affected by the order. I shall also speak, as we usually do in Ayrshire, on behalf of my two colleagues, my hon. Friends the Members for South Ayrshire (Mr. Foulkes) and Kilmarnock (Mr. McKelvey). If this debate had taken place before May 1979, I should also be speaking on behalf of the right hon. Member for Ayr (Mr. Younger). He and I took part in a series of meetings with Ministers dealing with Scottish colleges of education. It seems that promises made when in Opposition are forgotten when in office. I should also be speaking on behalf of the Member who represents North Ayrshire. It is such a long time since I have seen him that I cannot remember his name. I do not know whether he is still the hon. Member for Bute and North Ayrshire. [HON. MEMBERS: "Cheap."] It is not cheap. I am making a serious allegation. I am sorry that the hon. Member is not here to reply.
I do not accept the allegation by my hon. Friends that the Minister in control of education in Scotland is dishonest. My view is that the Minister is punch drunk. He has closed so many factories, schools and colleges of education in Scotland that he does not know what he is doing.
My hon. Friend the Member for West Stirlingshire (Mr. Canavan) complained that he had not received any letters. The Under-Secretary cannot write letters, because he does not know what is happening. Wherever he goes in Scotland, he is met by deputations and demonstrations against his policies. Once we were faced with the Highland clearances when the crofters were hunted from the Highlands. Now we are faced with clearances of workers from industrial Scotland.
My main criticism is that there has been no consultation about the order. It is strange that a Crombie code which has been in existence since the 1940s should be changed in a matter of days, especially at the end of a parliamentary Session. It is strange that the Minister should make the excuse that we no longer need Crombie codes to deal with redundancies during major reorganisations because there are statutory redundancy payments under the relevant Act.
In the private sector most employers pay well above the statutory minimum in redundancy payments. The Minister knows about the factory in Irvine which is to close. Employers are paying two-and-a-half times the statutory minimum in redundancy payments. Most private sector employers do that. The Government are attacking public sector workers.
My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said that he was afraid that the order was the start of an attack on public sector workers. I am not afraid: I know that it is the start of an attack on public sector workers by the Government. Like my hon. Friend the Member for West Stirlingshire, I have received a letter from the Under-Secretary. It states:
Corresponding action is to be taken to disapply the Crombie code in a number of other public sector areas where it applies or could apply to a future reorganisation.
The Minister has given warning to other public sector workers in the universities, local authorities, the teaching profession and nationalised industries that corresponding action will be taken to disapply the code. It means that be will take the same action against other public sector workers that he is taking against those who work in the colleges of education.
That is why I think that, even at this late date, the Minister should listen to the appeal of the hon. Member

for Dumfries (Sir H. Monro), reconsider the position and, by withdrawing the order, give us an opportunity to return to the negotiating table and attempt to achieve a settlement that will be not only fair to those who work in the colleges of education but might go some way to restore some of the Government's honour.

The Under-Secretary of State for Scotland (Mr. Alexander Fletcher): I have listened carefully to the points raised in the debate. I am happy to have the opportunity to respond to the comments that have been made. The hon. Member for Central Ayrshire (Mr. Lambie) suggested that the Government should reconsider the matter. I hope that when I have explained the position about the Crombie code, Opposition Members will reconsider the attacks that they have made on the Government. I say that in all seriousness, although I know that such points usually amuse the hon. Member for South Ayrshire (Mr. Foulkes). As I have said to him before, there is something funny about the air in South Ayrshire, considering what happened to his two predecessors.

Mr. Foulkes: What does the Minister mean by that remark?

Mr. Fletcher: That is self-evident considering what happened to the hon. Gentleman's predecessors.

Mr. Foulkes: rose—

Mr. Fletcher: I shall not give way.

Mr. Foulkes: I want to defend Emrys Hughes, not the other one.

Mr. Fletcher: The hon. Gentleman's predecessor but one could at least boast that he had a certificate to prove his sanity, which is more than the hon. Gentleman can do. The Crombie code was introduced in the 1940s——

Mr. Foulkes: rose——

Mr. Fletcher: —to compensate workers——

Mr. Foulkes: On a point of order, Mr. Deputy Speaker. I have been specifically named by the Minister. It is a convention in the House that when an hon. Member is named the person speaking gives way to allow the hon. Member to reply, especially when the remarks are made in such a slighting manner both to myself and my predecessor but one. He served the House honourably for many years, which is more than the Minister can claim.

Mr. Deputy Speaker (Mr. Bernard Weatherill): It is supposed to be a point of order. The hon. Gentleman's point was more in the form of comment.

Mr. Fletcher: The Crombie code was introduced in the 1940s to compensate workers made redundant as part of statutory reorganisation. It was designed in the context of the wave of nationalisation that followed the last war. Nearly 40 years have passed and the Government have decided, as a matter of general policy and not as a specific matter relating to the colleges of education in Scotland, that the code is not appropriate in present day circumstances. First, we consider that it is unjust that the extremely generous terms of the code should apply only to those involved in statutory reorganisations and not to others. Secondly, the code is complex and difficult to operate. Thirdly, and perhaps most important, alternative redundancy benefits are now available that were not


available in the 1940s. We have therefore decided as a matter of general policy that the Crombie code should be phased out from the public sector. That is what the regulations are deemed to do.

Mr. O'Neill: Will the alternative schemes be as generous as the Crombie code?

Mr. Fletcher: I shall deal with that in due course. My hon. Friend the Member for Dumfries (Sir H. Monro) and the hon. Members for Glasgow, Cathcart (Mr. Maxton) and Dundee, East (Mr. Wilson) objected to there having been no consultation or prior warning despite the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) having made it clear that there had been consultation. The Government decided over a year ago to discontinue the Crombie code. At that time they informed the CBI and the TUC of their intentions.

Mr. Maxton: rose——

Mr. Fletcher: Subsequently the Government held discussions with the TUC. It was not until mid-July this year that firm decisions were taken on the application of the policy to the colleges of education.

Mr. Maxton: rose——

Mr. Fletcher: It was not until July that we were able to give the colleges details of the changes that were pending. After mid-July we informed the colleges and their staff associations at the earliest possible moment.
The hon. Member for West Stirlingshire (Mr. Canavan) asked why, as he put it, we were withdrawing the code in the middle of statutory reorganisation. That is not the position as each statutory intervention by a Minister—in this instance new regulations or a fresh intake direction—constitutes a new statutory reorganisation. I am cognisant of the groans of the right hon. Member for Glasgow, Craigton (Mr. Millan), but he of all people should know that.

Mr. Maxton: That is nonsense and the hon. Gentleman knows it.

Mr. Fletcher: The hon. Member for Central Ayrshire (Mr. Lambie) asked about the Scottish colleges and their English counterparts. There are no arrangements for the continuing award of Crombie compensation to teacher training staff in England when staff in Scottish colleges will not receive it. The staff of the Scottish colleges are being treated in the same way as their colleagues south of the border.

Mr. Maxton: That is not quite true.

Mr. Fletcher: That is true. It has been suggested that there is some forfeiture of good will in our negotiations with the colleges. The hon. Member for Edinburgh, Central (Mr. Cook) asked about the objections that have been raised to the procedure. He will appreciate that all the objections come from within the college system. That is understandable. However, other parts of the public sector have not been complaining to my right hon. Friend that the Crombie terms are being withdrawn, least of all other members of the teaching profession in Scotland or elsewhere in the United Kingdom. Teachers who are made redundant are subject to quite different terms from those that are available under the Crombie scheme.

Mr. Cook: The national joint committee first read of these regulations in the press. However, a few days before the details were released it had met the Minister and his officials for consultation. On that occasion the regulations, which were laid only a few days later, must have existed in draft and must have been in at least the Minister's red box. When he knew that he was meeting the committee, why did he not take the opportunity to acquaint it with what it was about to read in the press?

Mr. Fletcher: I saw the committee a few days in advance of the decision being made. When I saw it, no decision had been made, despite the imagination of the hon. Gentleman.
The position of staff who are made redundant as a result of the dissolution of the colleges in Falkirk and Callendar Park, in Craiglockhart at Edinburgh, at Hamilton and at the Notre Dame college of education at Glasgow is safeguarded in respect of entitlement to the Crombie provisions. The redundancies which can be attributed to the closure regulations are unaffected by the regulations that are now under discussion. Similarly, any staff who are surplus as a result of directions limiting intake for the 1980–81 academic session or any previous session will be eligible for Crombie compensation.

Mr. George Robertson: I asked a specific question. In addition to saying what he has said just now, which was included in the letter from the Scottish Education Department which I read out, will the Minister say how staff in those affected colleges will be affected by the new contracts of employment that are being given to them by their new employers? Will the assurance that the Minister has just given continue to apply if they sign these documents, which were specifically excluded from the original closure regulations?

Mr. Fletcher: I understand the point that the hon. Member has made. In a meeting with the college principals some months ago, I raised that point because I foresaw the difficulties of staff in colleges: for example, with the transfer from Hamilton to Jordanhill, a senior lecturer at Hamilton undertaking the responsibilities of a junior lecturer at Jordanhill, or a similar arrangement.
The Crombie conditions are extremely complicated. I am not able to give a general assurance. I would like to give a simple explanation to the House. At this time, it is not a matter of taking advice from my officials. The matter has been gone into carefully. All I can say to the hon. Member for Hamilton (Mr. Robertson) is that the matter of the contractual arrangements is essentially between the governing body of the college and the staff.
The best description that I can give is that, if someone who is affected by the conditions of redundancy today undertakes a job in a new college such as Jordanhill to meet the requirements of the transitional arrangements, it would appear from the best advice that we have available that his entitlement to Crombie redundancy would not be affected. I regret having to say that every case must be considered on its merits. I have taken the best legal advice available to me on this matter. That is the qualification that I must make. When Opposition Members complain about the terms of Crombie, they are making my point—it is complex. That is one of the reasons why it is now being taken out of use.

Mr. George Robertson: This is an extraordinary interchange in which the Minister is involved. He has not


departed much from a brief in which there is an assurance that is almost word for word the assurance that was given to the organisations which were supposedly consulted at the beginning of this process. Asked the simple question that has been asked all summer by the people involved and affected by the measure, he tells us from the Dispatch Box of the House of Commons just before the regulations are pushed through that he still does not know what the words which he has just read out mean.
What are we supposed to take from that? What are the people affected supposed to take from the assurance that the Minister has repeated? It is a parcel of words put together as a cosmetic and palliative to try to persuade some people who are still in a precarious position that they will be in no more a precarious position tomorrow.

Mr. Fletcher: The hon. Member expresses his deep concern for those people. Together with other Opposition Members, not least the hon. Member for West Stirlingshire, he joins in general abuse with great levity. However, he should remember that these are legal requirements affecting individual lecturers at those colleges according to the agreements which they make with their governing bodies. No general rule can be applied to it.
At my instigation a letter was sent to all the colleges, explaining as well as we could what the effect of the arrangements would be. The hon. Gentleman has referred to that letter. I can only repeat this evening that each case has to be considered on its own merits. But I made the point that is would be reasonable to assume that any lecturer who is entitled to Crombie compensation today and who, in order to deal with a temporary situation at the college, undertakes another post, would not have his redundancy entitlement affected. But one has to emphasise the qualification that I made earlier, that each case has to be considered not just on its own merits but on the details of that case and the contractual arrangements made between the college and the individual lecturer. [Interruption.] I can assure the House that that is the best possible explanation that is available at this time. If Labour Members do not like it, they are simply underlining the fact that they do not like the Crombie arrangements and the Crombie compensation.

Mr. O'Neill: Is the Minister telling us that the statutory instrument is so imprecise that in individual cases of dispute people will have to go to the courts in order to get the position properly defined? If that is what he is saying he should withdraw the statutory instrument tonight.

Mr. Fletcher: I have always been doubtful of the hon. Gentleman's understanding of these things. He only emphasises his lack of understanding by the point that he has just made.
My hon. Friend the Member for Dumfries (Sir H. Monro) asked about the 1981–82 intake and how many people would be affected by the fact that lecturers who are covered by that direction will not receive Crombie compensation. It is not possible at this time to estimate how many will be affected by it, but we would expect that it would not be a large number. Nevertheless, he will be interested to know that the other terms which are available to lecturers, to which I shall refer shortly, will alleviate the problem of senior members of staff to the maximum possible extent.

Mr. Maxton: Will the Minister give way on that point?

Mr. Fletcher: The main form of redundancy compensation for college staff will in future take the form of a scheme of compensation for premature retirement, and this scheme brings the colleges into line with practice in local government, including teaching. The scheme has advantages over the Crombie arrangement in that compensation may be paid not only to staff who retire prematurely on the ground of redundancy but also to staff who retire prematurely in the interests of efficiency of their employers' functions. This will give college governors the opportunity to redress some of the structural imbalances which have crept into the college system over the last few years. Although the compensation given is less generous than Crombie, in effect it provides for an enhanced pension calculated on up to 10 years' additional service. It is, nevertheless, likely to be attractive to some college staff. In addition, colleges of education staff made redundant will, of course, like redundant staff in any type of employment, qualify for statutory redundancy payments in terms of the employment protection legislation.
There have been many mutterings on the Labour Benches when I have referred to the new scheme that will be available. The hon. Member for West Stirlingshire (Mr. Canavan), in referring to the order, said that it was the worst ever example of industrial relations. The hon. Member for Central Ayrshire said that it was an attack on the public sector. I hope that they will listen to a couple of figures describing how a lecturer—I am talking now of a senior lecturer, aged, say, 51, with 30 years' service—would be affected. [Interruption.] The levity again astounds me. Labour Members should at least know that the people who are most vulnerable in a situation such as this are 50-year-old lecturers and not people of 30, 35 or 40.

Mr. Canavan: How many?

Mr. Fletcher: I am talking of people with 30 years' service under Crombie. The figure is a lump payment of over £22,000 under Crombie and a continuing annual payment of £9,400. That, I suggest, is most generous.
With regard to compensation for premature retirement, under the new scheme the same individual will receive not £22,700 but £21,100 and an annual sum not of £9,400 but of just over £7,000. I suggest that that is generous payment in any circumstances for the kind of service to which I have referred.

Mr. Maxton: Will the Minister give way?

Mr. Fletcher: I would also say to the House that it is not too generous in the circumstances. I believe that it is perfectly legitimate. [HON. MEMBERS: "Give way."] I hope that Opposition hon. Members who listen rather than shout abuse all the time will bear in mind the point that I have made. For the benefit of those who may have missed it—

Mr. Maxton: Will the Minister give way?

Mr. Deputy Speaker: Order. The Minister is patently not giving way.

Mr. Fletcher: I repeat that the lump sum payment is only about £1,500 less under the new scheme. The annual payment, admittedly, is £2,400 less, but it is still a sum in excess of £7,000 and it is still a generous recompense for the service involved.

Mr. Maxton: rose——

Mr. Fletcher: Labour Members have, as usual, attacked the measure without giving it any proper consideration. Their speeches have generally been full of abuse rather than any thoughtful consideration of the matter. When the figures are understood, at least by people other than Opposition Members, it will be seen that there is no way in which the Government have been mean in the regulations.
I therefore happily recommend to my hon. Friends that they oppose the prayer.

Mr. O'Neill: I had not intended to speak again, but it is necessary to say that the Minister's answers have been so unsatisfactory that I do not think that anyone could justify support for the regulations.
The example that the Minister chose to give of the alleged generosity of the alternative to Crombie is ridiculous. The chances of finding a lecturer aged 51 with 30 years' service who could be employed in a college of education are virtually nil. Had he chosen a lecturer aged 49, it would have been made quite clear that he would not have been eligible for the scheme.
When we asked the Minister about anomalies, he said that the matter was so complicated that each individual anomalous case would have to be brought before the courts.
The statutory instrument is completely and utterly worthless. It is just another example of the incompetence of the Education Department and of the Under-Secretary of State. I urge my hon. Friends to oppose the regulations.
Question put:

The House divided: Ayes 60, Noes 111.

Division No. 306]
[11.02 pm


AYES


Allaun, Frank
Hooley, Frank



Alton, David
Hughes, Robert (Aberdeen N)


Bagier, Gordon A.T.
Lambie, David


Beith, A. J.
Lyons, Edward (Bradf'd W)


Bennett, Andrew(St'kp't N)
McCartney, Hugh


Booth, Rt Hon Albert
McElhone, Frank


Boothroyd, Miss Betty
McKay, Allen (Penistone)


Brown, Hugh D. (Provan)
MacKenzie, Rt Hon Gregor


Buchan, Norman
Maclennan, Robert


Callaghan, Jim (Midd't'n &amp; P)
McTaggart, Robert


Campbell-Savours, Dale
Marshall, Jim (Leicester S)


Canavan, Dennis
Maxton, John


Carmichael, Neil
Milian, Rt Hon Bruce


Conlan, Bernard
Newens, Stanley


Cook, Robin F.
O'Neill, Martin


Crowther, Stan
Penhaligon, David


Cryer, Bob
Robertson, George


Cunningham, Dr J. (W'h'n)
Ross, Ernest (Dundee West)


Dalyell, Tam
Skinner, Dennis


Dewar, Donald
Soley, Clive


Dormand, Jack
Stewart, Rt Hon D. (W Isles)


Dubs, Alfred
Stott, Roger


Eadie, Alex
Strang, Gavin


Eastham, Ken
Walker, Rt Hon H.(D'caster)


Ewing, Harry
Welsh, Michael


Forrester, John

Wilson, Gordon (Dundee E)


Foulkes, George
Wilson, William (C'try SE)



Grant, George (Morpeth)
Woolmer, Kenneth


Hamilton, James (Bothwell)



Hamilton, W. W. (C'tral Fife)
Tellers for the Ayes:


Harrison, Rt Hon Walter
Mr. George Morton and


Home Robertson, John
Mr. Frank Haynes.




NOES


Alexander, Richard
Maude, Rt Hon Sir Angus


Ancram, Michael
Mellor, David


Aspinwall, Jack
Meyer, Sir Anthony


Atkins, Robert(Preston N)
Mills, lain (Meriden)


Baker, Kenneth(St.M'bone)
Moate, Roger


Baker, Nicholas (N Dorset)
Monro, Sir Hector


Bennett, Sir Frederic (T'bay)
Morgan, Geraint


Benyon, Thomas (A'don)
Morrison, Hon C. (Devizes)


Berry, Hon Anthony
Murphy, Christopher


Blackburn, John
Myles, David


Boscawen, Hon Robert
Neale, Gerrard


Braine, Sir Bernard
Needham, Richard


Bright, Graham
Neubert, Michael


Brinton, Tim
Newton, Tony


Brotherton, Michael
Onslow, Cranley


Brown, Michael(Brigg &amp; Sc'n)
Osborn, John


Bruce-Gardyne, John
Page, Richard (SW Herts)


Budgen, Nick
Proctor, K. Harvey


Butcher, John
Rathbone, Tim


Cadbury, Jocelyn
Rees-Davies, W. R.


Carlisle, Kenneth (Lincoln)
Rhodes James, Robert


Chapman, Sydney
Rhys Williams, Sir Brandon


Clarke, Kenneth (Rushcliffe)
Roberts, Wyn (Conway)


Colvin, Michael
Rost, Peter


Cope, John
Sainsbury, Hon Timothy


Dorrell, Stephen
Scott, Nicholas


Dover, Denshore
Shaw, Giles (Pudsey)


Dunn, Robert (Dartford)
Shaw, Michael (Scarborough)


Edwards, Rt Hon N. (P'broke)
Shelton, William (Streatham)


Fairgrieve, Sir Russell
Shepherd, Colin (Hereford)


Faith, Mrs Sheila
Speller, Tony


Fenner, Mrs Peggy
Spicer, Jim (West Dorset)


Fletcher, A. (Ed'nb'gh N)
Spicer, Michael (S Worcs)



Forman, Nigel
Stanbrook, Ivor


Fraser, Peter (South Angus)
Stevens, Martin


Garel-Jones, Tristan
Taylor, Teddy (S'end E)


Goodhew, Victor
Thomas, Rt Hon Peter


Goodlad, Alastair
Thompson, Donald


Gower, Sir Raymond
Townend, John (Bridlington)


Gray, Hamish
Trotter, Neville


Griffiths, Peter Portsm'th N)
van Straubenzee, Sir W.


Hannam, John
Viggers, Peter


Hawksley, Warren
Waddington, David


Hill, James
Wakeham, John


Hordern, Peter
Wall, Sir Patrick


Hunt, David (Wirral)
Waller, Gary


Hunt, John (Ravensbourne)
Wells, John (Maidstone)


Jopling, Rt Hon Michael
Wells, Bowen


King, Rt Hon Tom
Wheeler, John


Knight, Mrs Jill
Wickenden, Keith


Lawrence, Ivan
Wilkinson, John


Lloyd, Peter (Fareham)
Wolfson, Mark


Macfarlane, Neil
Young, Sir George (Acton)


McNair-Wilson, M. (N'bury)



McQuarrie, Albert
Tellers for the Noes:


Major, John
Mr. Peter Brooke and


Marlow, Antony
Mr. Selwyn Glimmer.


Mather, Carol

Question accordingly negatived.

COMPULSORY PURCHASE (VESTING DECLARATIONS) BILL [Lords]

Ordered,

That, in respect of the Compulsory Purchase (Vesting Declarations) Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a Second time.

TRUSTEE SAVINGS BANK BILL [Lords]

Ordered,

That, in respect of the Trustee Savings Bank Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a Second time.

BROADCASTING BILL [Lords]

Ordered,

That, in respect of the Broadcasting Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a Second time.—[Mr. Thompson.]

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. Thompson.]

Adjourned accordingly at fourteen minutes past Eleven o'clock.